A deduction granted to buyers/retailers for paying the bills within an agreed upon period of time. The discount is computed on the net amount due after first deducting trade and quantity discounts from the base price. Usually expressed in terms such as 2/10, net 30, where a 2% discount is given for payment within 10 days. If not paid in 10 days, the full amount is due in 30 days. The purpose of these discounts is to encourage prompt payment of bills.
Incentive for paying bills before due date that a seller could offer. In return the buyer gets either a small reduction of the owed amount or a percentage of the sum. This technique encourages cash conversion cycle of businesses.
See also: Cumulative quantity discount,
Noncumulative quantity discount, Trade discount
