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#159025 - 10/01/06 10:10 PM 2% discount
trevman Offline
Member

Registered: 08/17/05
Posts: 47
Loc: canada
What do you think about 2% discount for payment in 15 days from invoice date. Is anyone doing this and is it effective.

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Business, Office, Estimating, Legal:
#159026 - 10/02/06 05:06 AM Re: 2% discount
Tiger Offline
Member

Registered: 05/04/05
Posts: 714
Loc: Crystal Lake, IL USA
I always do it. It's 2%. The only reason not to is if you have cash flow problems like receivables over 30 days.

Dave

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#159027 - 10/02/06 10:17 AM Re: 2% discount
ngoody24 Offline
Member

Registered: 09/25/05
Posts: 34
Loc: pace,FL, United States
How could you handle that add it to your overhead or loose alittle profit in the end? Just though I woould ask you guys.

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#159028 - 10/03/06 05:55 PM Re: 2% discount
ExpressQuote Offline
Member

Registered: 04/27/06
Posts: 83
Loc: BC, Canada
Most guys won't worry about the 2%, but if you adjust your pricing at the estimate stage by figuring out how much you want to charge the client, then divide that amount by .98 (100%-2%) you will have an adjusted retail price that allows you to offer the discount without cutting into your needed profits.

If you wanted to make this more substantial, you could do this with a 5% or 10% discount and still maintain the level of pricing you need for overhead and profit.

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#159029 - 10/03/06 06:05 PM Re: 2% discount
mahlere Offline
Member

Registered: 11/17/05
Posts: 514
Loc: New Jersey
if you do $10,000 month with the supply house, you'll save $200 by paying net 10. If you put that money in a high yield checking account (like ING Direct) you'll earn 4% on that money. So, you'd lose approx $200 by paying the supplier NET 10.

just a thought.

this is under the assumption that you are billing and collecting in order to pay this bill. Not that you continually have $10,000 in the bank to pay and wait for your money. But even then, leave the $10,000 in the bank, and pay at the end of the month. Then if someone is a late pay, you are not stretched.

[This message has been edited by mahlere (edited 10-03-2006).]

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#159030 - 10/03/06 07:39 PM Re: 2% discount
trevman Offline
Member

Registered: 08/17/05
Posts: 47
Loc: canada
the reason I mentioned this is because I am doing contracts for a large corporation and in the contract agreement payments from them are net 60,so I offered 2% for payment in 15 days and they accepted.I will now add this in to my estimates in the future.
I think if i wasnt so new at the business game i would not be doing this, but i am working alone and these contracts are taking most of my time and for now are my biggest form of cash flow.

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#159031 - 10/03/06 08:04 PM Re: 2% discount
ExpressQuote Offline
Member

Registered: 04/27/06
Posts: 83
Loc: BC, Canada
trevman,

In my opinion, money in your bank sooner is a much better scenario...

Nothing wrong with what you're doing IMHO.

I think it is a great idea to reduce the wait and finance charges on your end.

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#159032 - 10/03/06 08:12 PM Re: 2% discount
trevman Offline
Member

Registered: 08/17/05
Posts: 47
Loc: canada
I talked to my acct and he said that 2% can be a tax right off. so maybe ill get some of it back.

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#159033 - 10/04/06 03:22 AM Re: 2% discount
Tiger Offline
Member

Registered: 05/04/05
Posts: 714
Loc: Crystal Lake, IL USA
Sorry I misunderstood your post. Suppliers give a 2% (pd. by the 10th) dicount when the invoice is due in 30 days. It's a great move on your part to get the payment early. A 60 day net can give you serious cash flow problems. You solved the problem.

Congratulations, it sounds like you have a great business going.

Dave

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#159034 - 10/04/06 03:48 AM Re: 2% discount
mahlere Offline
Member

Registered: 11/17/05
Posts: 514
Loc: New Jersey
trev, i misunderstood as well. take that money that is now Net 15 and put that into a high yield checking account. You'll get that 2% back in a month. You have the cash if needed and get the extra % from the bank. Essentially, you have just made them a net 30-40 at full price.

good luck

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