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Types of discounts used in invoices by businesses

Updated on :  

08 min read.

Every customer loves a good bargain. As a consumer, your eyes are likely to fall for items that can save you a bit of money on the purchase. Moreover, discounts are a good tactic to employ in the pursuit of customer growth.

Discounts enable the business to attract new potential customers while also allowing them to retain existing customers. Here are some types of discounts on invoices used by businesses.

  • Cash Discount

If an amount is outstanding from a debtor with regard to a particular invoice, a deduction on the total invoice may be allowed in cases where the payment is made well before the due date for payment. This is a cash discount. A cash discount is also allowed where the customer makes an immediate cash payment. 

  • Trade Discount

If a product has a listed/catalogue price of Rs.100, the seller will sell it to a customer at the same price. However, a reseller may place a bulk order for the same product. The seller may offer a discount of 20% from the listed price and charge the reseller Rs.80 per unit of the product. This is called a trade discount. It does not form part of the books of accounts, but instead, it will be recorded in the books at a discounted price (Rs.80). 

  • Quantity Discount

Bulk purchases are good for the seller since a majority of his stock gets cleared. To reward the purchaser for his faith in the products, the seller will offer him a discount due to the quantity ordered by him. This is referred to as a quantity discount.

  • One for One

BOGO (Buy one, get one) offers are very common today. This marketing technique works very well with customers as they just can’t say no to a bargain deal. In this instance, the customer purchases two of the same item, giving in to the offer. The product offered for free may either be identical to the first one or could be something else entirely. E.g., if you order one regular-sized pizza worth Rs.399 from a famous pizza store, you get a pet bottle of Cola and a box of garlic breadsticks for free. 

  • Percentage Sales

Discounts given as a percentage of the sale value of a particular item are referred to as percentage sale discounts. Showing the discount as a percentage value tends to sound more attractive to potential customers than rupee value discounts.

E.g., a favourite food delivery app offers you 40% off at a particular restaurant on the occasion of its anniversary.

  • Discount on early payment

This is a very common incentive offered in the business world. The invoice will often contain a note on the following lines – “If the payment is made earlier, a discount of 5% will be allowed on the invoice value.” This is done to facilitate quicker payments so that the amount from sales is realised quickly and efficiently.

  • Free shipping discounts

Online purchases are all the rage today. The online shopping experience has evolved. To attract new customers and retain existing customers, free shipping is very common with these businesses.

E.g., buy products on a famous online app worth Rs.999 and avail the free shipping discount.

  • Price bundling

It is sometimes referred to as cross-selling as well. In this method, various services are bundled together to form a package deal at a discounted price. This is called price bundling. If these services were to be availed individually, they’d probably cost more. Therefore, this draws the customers’ attention and convinces them to believe this is a good deal.

E.g., a well-known mobile service provider offers broadband plans at various rates such as Rs.799 per month, Rs.999 per month, etc. The Rs.799 plan will have an internet connection and a landline connection with it. However, the Rs.999 plan comprises an internet connection, landline connection, and one-year subscriptions to various over-the-internet platforms.

  • Referral Programmes

One of the recent tactics adopted by businesses is the referral programme concept. Through this, the businesses get the customers to do their advertising for them. For many businesses, this has proven to be a resounding success. A customer is given a referral code on signing up. To collect the reward, the customer has to convince a new customer to avail the services of the business on offer by signing up with the referral code.

E.g., a famous Indian payment app had a referral programme in place that provided an incentive to each user to refer a new user to the platform. An amount equal to Rs.50-Rs.100 would be the reward for such a referral.