3/30/2023 0 Comments Invoices due![]() ![]() Discounts come in several forms: static, dynamic or sliding scale.Early payment discounts can cut into profit margins if not strategically applied.Early payment discounts provide businesses with more control over their cash flow, can improve their competitiveness and even boost customer loyalty.An early payment discount is an incentive that reduces the dollar amount of an invoice if the customer pays it in advance of the due date.A lower DSO reflects well on a company’s financial processes and overall financial health. In addition, early payments decrease a cash-flow metric known as days sales outstanding (DSO), which measures the amount of time it takes for an invoice to be paid. The customer benefit is clear, but businesses also benefit by getting their hands on cash that otherwise would be tied up in accounts receivable - money that might be used to bridge a cash-flow gap or for business growth. For example, a 2/10 EPD indicates a 2% discount if the invoice is paid within 10 days. ![]() Typical discounts fall in the 1% to 2% range. What Is an Early Payment Discount (EPD)?Īn early payment discount (EPD) reduces the dollar amount of an invoice as an incentive to get customers to pay their bills ahead of the payment terms. Early payment discounts come in several forms and can be a win-win for businesses and customers alike, provided they’re applied strategically so as not to cut into profit margins. One way to encourage this desired behavior is to offer certain customers a percentage off the total amount of their bills if they pay them before they’re due. Think of how predictable your cash flow would be and how much healthier your balance sheet would look. Wouldn’t it be great if customers paid their bills early - or at least on time? Think of all the time saved in chasing them down, reissuing invoices or sending them to collections. East, Nordics and Other Regions (opens in new tab) ![]()
0 Comments
Leave a Reply. |
AuthorWrite something about yourself. No need to be fancy, just an overview. ArchivesCategories |