What is a cash discount?

Cash discount is a strategy for marketing and relationships with clients, which is often employed to provide consumers with further motivation to do business with a specific company. In some cases, a cash discount with a percentage or flat rate, which is extended when the customer pays an outstanding invoice in the specified period of time. In other situations, the cash discount is used when the consumer decides to pay for goods and services using cash currency rather than some alternative form of payment such as credit cards.

Cash discount is traditionally an offer that is included either in the contractual agreement between the supplier and the client. The terms of the offer usually relate to timely payment for an excellent invoice. As an example, the supplier may issue invoices with a standard payment cycle of thirty days. If the client decides to bring the payment to the supplier within ten days of the date of issue on the invoice, a discount on the customer's account will be used.

Cash discount can appeart, as a credit or line item on the invoice next month or be used for the next purchase. On rare occasions, the supplier may include the conditions of the cash discount on the invoice, with the customer's instructions to pay a slightly lower amount if the payment is sent in the specified window.

In recent years, newer cash discounts have appeared. Some suppliers now offer immediate cash discounts if the consumer pays in cash rather than using a credit card. One example of this approach is gasoline. Many consumers do not realize that the seller pays a credit card payment fee. To attract clients to pay in cash, so they avoid a fee, the supplier will offer discounts from the standard price. The consumer saves a small amount of the current price, while the sale avoids paying the transaction processing fee.