Invoice discount

accounting

Invoice discounting is the commercial practice carried out by all types of companies, through which different advantages are offered to customers. They appear in the billing of the good or service offered.

By applying discounts to invoices, companies have the ability to reduce the price of the goods and services they offer for various reasons.

In this sense, it is considered that any type of discount applied to an invoice constitutes a commercial strategy.

These pursue the achievement of objectives such as customer loyalty or increasing their sales ratios and, therefore, their economic benefits.

Although the invoice discounts form a commercial agreement between the seller and the buyer or client, there are discount models that facilitate the appearance of a third party.

This happens in cases that require the action of an entity that favors the financing of certain operations. This is the case with factoring contracts, mostly.

Invoice discount examples

There are common business practices, by which a discount of this type is valued.

Every day it is possible to observe them in examples such as the following:

  • Rappel on sales: The organization applies a discount on the invoice, taking into account a certain sales volume.
  • Prompt payment: In cases where there is a certain payment term, the seller offers, at the time of invoicing, certain conditions or commercial advantages for prior repayments or the satisfaction of the debt before maturity.
  • Awards and loyalty: Following different strategic criteria, a company can offer many other commercial advantages to a specific customer. These are reflected in the invoice in detail.
  • Factoring.:It is the application of certain financing calculations that allow companies to collect their invoices, regardless of their clients' ability to pay.

It is important to point out that the aforementioned modalities must be consciously and formally reflected in the invoice.

Alternatively, there are other types of discount that are not detailed and are applied at a time other than billing.

Factoring as an invoice discount modality

In business theory, there is the mode of factoring or factoring. It is a very widespread invoice discount tool in day-to-day business, especially in the retail sector.

For its implementation, a third party is required, in the figure of a credit institution or bank. This part allows the customer to have said credit line. They are currently understood as a kind of advance.

This practice is called a discount, as it allows many companies to save on administration-related costs. In the same way, it reduces commercial risk and ensures the collection of invoices issued.

That is why it is common for many companies to establish business relationships with clients who practice factoring, rewarding them with different advantages or rate reductions.

Tags:  banks famous-phrases administration 

Interesting Articles

add
close

Popular Posts

economic-dictionary

Businessman

economic-dictionary

Cube root

economic-dictionary

Types of pyramid