How to Calculate Discount for Paying Off Receivable Loan Early
If another business sells your business supplies or equipment on credit, it may offer you a sales discount for paying off the invoice early. (See References 1, Purchase Considerations For Merchandising Businesses) The amount you owe is called an account receivable from the seller’s perspective. An invoice that offers a sales discount typically shows its credit terms in the following format: 1/10, n/30. The “1” represents the percentage discount. The “10” represents the number of days in which you must pay in order to receive the discount. The “n/30” means the net balance is due within 30 days if you don’t pay within the discount window. (See References 2)
Other People Are Reading
Instructions
-
-
1
Determine the date, balance and credit terms of an invoice that offers a sales discount. For example, assume you have a $500 invoice dated Jan. 1 with credit terms of 1/15, n/30. This means you would receive a 1 percent discount on the $500 balance if you pay within 15 days of Jan. 1. Otherwise, you must pay the balance within 30 days of Jan. 1, or the balance will become past due.
-
2
Determine the date on which you will pay the invoice. In this example, assume you will pay the invoice on Jan. 10.
-
-
3
Add to the invoice date the number of calendar days within which you must pay the balance to receive the discount. Then determine whether the date you will pay the invoice falls before that date. In this example, add 15 calendar days to Jan. 1, which equals Jan. 16. Jan. 10 falls before Jan. 16, so you are eligible for the discount.
-
4
Multiply the percentage discount by the invoice balance to calculate the discount you will receive. In this example, multiply 1 percent, or 0.01, by $500 to get a $5 discount.
-
5
Subtract the discount from the invoice balance to determine the discounted amount you must pay. In this example, subtract $5 from $500 to get a discounted payment of $495.
-
1
