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Cash Discount


Definition: A percentage reduction in price for payment within a specified period of time.

An invoice may include the notation "2/10, Net 30". This refers to a 2% discount to the retailer if payment is received within 10 days of the delivery of goods, and full payment is expected within 30 days.

Cash discounts usually range from 1% to 3% and are indicated on the invoice along with the credit period. Our recent shipment of widgets had an invoice of $5000 and a "1/10 Net 30" notation. We cut a check to the vendor the next day for $4950 and received a trade discount of $50. ($5000 x .01 = $50)

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