Discounts are the saving grace for a buyer. They are hard to ask for, but they are equally hard to understand. There’s a lot of math involved in availing discounts, which you should understand well to get the best of the deal that has been provided to you. This article highlights the importance of knowing the way vendors’ math works, how it works, and how you can make the best of it.
It’s a bit hard to understand at first, but once you get the hang of it discounts can be easy to calculate, and you can save a lot of money.
Ordinary dating is the simplest way to know when an invoice is supposed to be paid. It is denoted in the following format << ”discount that can be availed”/ ”length of the discount period” net “till when can the payment be made” >>. Let us break down this terminology and look at it with an example.
The discount that can be availed is the discount by virtue of early payment. Early payment is heavily promoted by vendors in all businesses. The length of the discount period is the time in which you are supposed to make the payment or a part of the payment to avail of the discount. You can cross this date, but that won’t let you avail of the discount, which brings us to the last point. The part after ‘net’ tells when we can pay the invoice without incurring any late fees. If you follow this carefully, you should have no problem understanding how to make payments.
Types of discounts
There are various discounts available a supplier can offer you. This can be based on how much you buy the product, how close you are to the supplier (geographically), and your loyalty to your supplier. Here are the discounts a supplier can offer you:
- Trade discounts: Trade discounts are discounts that you can avail of by virtue of your supply chain. It depends on how big your company is, how frequently you need to restock, and your position in the distribution system.
- Quantity discounts: These discounts are based on the quantity of the product you buy. If you buy more, you’ll get it at a lower price; this is called buying in bulk. This is a practice usually undertaken by big companies.
- Loyalty discount: Loyalty discount is usually given to customers who have repeatedly bought products from the same vendor. These are very generous but usually are given to those customers who have proven their mettle.
- Sales discount: This discount can be availed by companies when a vendor is selling products at a price lower than the selling price in the market. This usually happens in situations like the end-of-season sale.
- Seasonal discount: These are discounts you can avail of by virtue of the time of the year you are buying the products. This encourages retailers, suppliers, and distributors to get the products before the season starts.
If you feel like you don’t have the money to pay the supplier in the discount period, there is a way you can get a discount on a smaller amount. This is called partial payment, and it works in a peculiar way. The amount you pay before the date can be discounted, and the rest can be paid at the nominal rate without the discount. For example, if the bill comes out to be $3700 at 2/10 net 30, you can pay $980 to avail an offer on $1000 of the bill.
So, effectively you have paid out a part of your bill at the 2% discount and the rest without it in the next 20 days. This makes payment much easier. This might not seem too advantageous at first, but the more the value increases, the more you save on your bill. You will most likely see this in your own business; practical knowledge is very important, after all.
It is important to build a healthy relationship with your vendors if you want your business to grow and flourish. If you want to fetch better discounts, then you can try any of the above-mentioned methods. This will provide you with some relaxation, and you will be able to work with consistency. Also, if you are a customer, then this will help you in saving your hard-earned money. However, if you are the vendor, then this will help you in attracting your customers and help in building the foundation of trust among your customers. This also helps you in getting early payments from your customers.
To sum up, there are numerous advantages of discounts. Both vendors and customers get an opportunity to save their money and emerge profitably at the same time.