Editing Discounts and allowances (section)

== Dealing with payment ==
===Trade discounts===
''Trade discounts'' are deductions against the [[list price]] or catalogue price which are charged by a [[wholesaler]] or [[manufacturer]] to a [[retailer]] or supplier who then deals with the end customer. The discount then enables the retailer to charge the end customer the list price and cover its own costs/profit.<ref>AccountingTools.com, [https://www.accountingtools.com/articles/what-is-a-trade-discount.html Trade discount definition], published 18 October 2024, accessed on 14 December 2024</ref>

=== Prompt payment discount {{anchor|Prompt payment discount}} ===
''Cash discounts'' are reductions in price given to the [[debtor]] to motivate the debtor to make payment within specified time. These discounts are intended to speed payment and thereby provide [[cash flow]] to the firm. They are sometimes used as a [[promotion (marketing)|promotional]] device. A UK survey undertaken by the [[British Chambers of Commerce]] found that 13% of UK businesses offered prompt payment discounts (PPDs).<ref name=vat />

==== Examples ====
* 2/10 net 30 - this means the buyer must pay within 30 days of the invoice date, but will receive a 2% discount if they pay within 10 days of the invoice date.
* 3/7 EOM - this means the buyer will receive a cash discount of 3% if the bill is paid within 7 days after the end of the month indicated on the invoice date. If an invoice is received on or before the 25th day of the month, payment is due on the 7th day of the next calendar month. If a proper invoice is received after the 25th day of the month, payment is due on the 7th day of the second calendar month.
* 3/7 EOM net 30 - this means the buyer must pay within 30 days of the invoice date, but will receive a 3% discount if they pay within 7 days after the end of the month indicated on the invoice date. If an invoice is received on or before the 25th day of the month, payment is due on the 7th day of the next calendar month. If a proper invoice is received after the 25th day of the month, payment is due on the 7th day of the second calendar month.
* 2/15 net 40 ROG - this means the buyer must pay within 40 days of receipt of goods, but will receive a 2% discount if paid in 15 days of the invoice date. (ROG is short for "receipt of goods".)

====Taxation treatment====
Before 2014, suppliers in the United Kingdom were permitted to add [[Value-added tax in the United Kingdom|VAT]] to the discounted price, even if payment was not made within the discount period and therefore due in full. This provision generated a shortfall in [[tax revenue|taxation revenue]] and also meant that UK practices were not in line with the EU's [[European Union value added tax#Recast Sixth Directive|VAT Directive of 2006]], which specified that value added tax was to be levied on the actual price paid. Proposals were put forward in the [[2014 United Kingdom budget|budget of 2014]] to amend the UK's [[taxation law]] in this respect. In the telecommunications and broadcasting sectors (where there was no obligation to provide a VAT invoice), the law was amended from 1 May 2014, while in other sectors of the economy, the change was effective from 1 April 2015.<ref name=vat>HMRC, [https://assets.publishing.service.gov.uk/media/5a7c983040f0b6629523a87e/TIIN_9022_VAT_prompt_payment_discounts_.pdf VAT: prompt payment discounts], published on 19 March 2014, accessed on 27 December 2024</ref>

=== Preferred payment method discount {{anchor|Preferred payment method discount}} ===
Some retailers (particularly small retailers with low margins) offer discounts to customers paying with cash, to avoid paying fees on [[credit card]] transactions.

=== Partial payment discount {{anchor|Partial payment discount}} ===
Similar to the trade discount, this is used when the seller wishes to improve [[cash flow]] or liquidity, but finds that the buyer typically is unable to meet the desired discount deadline. A partial discount for whatever payment the buyer makes helps the seller's cash flow partially.<ref>{{Cite web |last=Chopra |first=Srishta |title=Library Guides: Math help from the Learning Centre: Payment Terms and Cash Discounts |url=https://libraryguides.centennialcollege.ca/c.php?g=645085&p=5114199 |access-date=2022-12-28 |website=libraryguides.centennialcollege.ca |language=en}}</ref>

=== Sliding scale ===
{{Main|Sliding scale fees}}
A discount offered based on one's ability to pay. More common with non-profit organizations than with for-profit retail.

=== Forward dating {{anchor|Forward dating}} ===
This is where the purchaser doesn’t pay for the goods until well after they arrive. The date on the invoice is moved forward - example: purchase goods in November for sale during the December holiday season, but the payment date on the invoice is January 27.<ref>{{Cite web|title=Forward dating - Financial encyclopedia|url=https://www.finansleksikon.no/en/Eng_Accounting/F/Forward_dating.html|access-date=2021-05-10|website=www.finansleksikon.no}}</ref>

=== Seasonal discount {{anchor|Seasonal discount}} ===
[[File:Sales promotion 2015 0001.JPG|thumb|A seasonal sales promotion]]
These are price reductions given when an order is placed in a slack period (example: purchasing skis in April in the northern hemisphere, or in September in the southern hemisphere). On a shorter time scale, a [[happy hour]] may fall in this category. Retailers organize big discounts on almost every season in order to make space for new inventory for the upcoming season.

Generally, this discount is referred to as "X-Dating" or "Ex-Dating". An example of X-Dating would be:
* 3/7 net 30 extra 10 - this means the buyer must pay within 30 days of the invoice date, but will receive a 3% discount if they pay within 7 days after the end of the month indicated on the invoice date plus an extra 10 days.

=== Spaving ===
{{main|Spaving}}
Spaving is a [[marketing strategy]]. Consumers are encouraged to spend money to gain access to savings. Spaving offers include free shipping at a certain threshold and [[buy one, get one free]].<ref name="Dickler2024">{{cite news |last1=Dickler |first1=Jessica |title=Americans can't stop 'spaving' — here's how to avoid this financial trap |url=https://www.cnbc.com/2024/05/06/americans-cant-stop-spaving-heres-how-to-avoid-this-financial-trap.html |access-date=19 May 2024 |publisher=CNBC |date=6 May 2024 }}</ref>