Cash Discounts are reductions in price given by the creditor to the debitor to motivate the debitor to make payment with in specified time .

speed dating rules prices-90speed dating rules prices-21

Examples of these functions are warehousing and shelf stocking.

Trade discounts are often combined to include a series of functions, for example 20/12/5 could indicate a 20% discount for warehousing the product, an additional 12% discount for shipping the product, and an additional 5% discount for keeping the shelves stocked.

These are price reductions based on the quantity of a single order.

The expectation is that they will encourage larger orders, thus reducing billing, order filling, shipping, and sales personnel expenses.

Some retailers (particularly small retailers with low margins) offer discounts to customers paying with cash, to avoid paying fees on credit card transactions.

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. More common with non-profit organizations than with for-profit retail.

This is where the purchaser doesn’t pay for the goods until well after they arrive.

The most common types of discounts and allowances are listed below.