Those companies offering early payment discounts inevitably deal with the frustration of having customers either miscalculate the amount of their deductions or the dates by which discounts must be taken. Some have a difficult time interpreting such common discount terms as 2%/10, Net 30 (take a two percent discount if paid within ten days or pay the full amount in 30 days). Admittedly, some accounting software packages jam these terms into the smallest possible space on the invoice, so the terms look more like “2/10 N30,” which can be somewhat more confusing. Further, customers have trouble determining the date by which they must pay a discount, frequently using their invoice receipt date rather than the invoice date. The result of these problems is incorrect discounts taken, and usually later than the specified dates.
The solution is to state on the invoice the exact amount of the cash discount a customer can take, and the date by which payment must be made in order to earn the discount. This information should be stated clearly on the invoice, preferably in bold, and outlined by a box.
This can be a difficult best practice to implement, because few commercially available accounting software packages provide for it. Instead, one must customize the system to automatically calculate the information and include it on the invoice form. An alternative manual approach is to create a stamp on which this information can be printed, and use the stamp to manually calculate and enter the information on the invoices of just the largest customers or those customers who have a history of discounting problems.