What is meant by Cash discount?
The term "cash discount" refers to a price reduction that a seller grants to the buyer if they pay the invoice within a certain, usually short period. It serves as an incentive for prompt payment and can improve the company's liquidity.
Typical software functions in the area of "cash discount":
- Discount calculation: Automatic calculation of the discount amount based on the invoice amount and the discount rate.
- Payment terms management: Definition and management of various discount rates and periods.
- Invoicing: Integration of discount information in invoices and quotes.
- Booking automation: Automatic posting of discount entries in financial accounting.
- Liquidity planning: Consideration of discount effects in cash flow forecasting.
- Customer account analysis: Evaluation of discount usage by customers to optimize payment terms.
Examples of "cash discount":
- 2% discount for payment within 10 days, net 30 days.
- Tiered discount rates: 3% for payment within 7 days, 2% within 14 days.
- Material cost discount: Discount is only granted on the material portion of a craftsman's invoice.
- Gross discount: The discount amount is deducted from the gross invoice amount.
- Net discount: The discount amount is calculated only from the net invoice amount.
- Discount tiering based on turnover: Higher discount rates for major customers with high order volumes.
