Cash discount (Skonto)

In short: A cash discount (Skonto) is a price reduction when the customer pays an invoice within a short period, for example “2 % if paid within 10 days”.

In more detail: The discount works like a very high interest rate. If you pay under “2 % in 10 days, net 30 days” 20 days earlier than the last day, you save 2 % of the amount. Annualised, that is about 37 %. A cash discount is almost always worth taking, even if you have to use an overdraft for it.

Our context: The invoice generator calculates the discount amount, the discount date and the effective annual rate.

In Depth

• Formula (effective annual rate): discount % / (100 − discount %) × 360 / (payment term − discount period) in days. Example: 2 / 98 × 360 / 20 ≈ 36.7 %.
• VAT: The discount reduces the price and the VAT. The seller corrects the tax, the buyer the input tax.
• Rebate or cash discount: A rebate is deducted immediately and shown on the invoice. A cash discount depends on a payment condition.
• Difference to bonus: A bonus comes afterwards, for example for turnover.

See also: Writing an invoice (mandatory details under § 14 UStG), Default interest and dunning