View Poll Results: Are you offering your customers an early payment discount?

Voters
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  • Yes

    2 11.11%
  • No

    12 66.67%
  • Plan to in the future

    0 0%
  • Undecided

    4 22.22%
Multiple Choice Poll.
Results 1 to 11 of 11
  1. #1
    Join Date
    Jul 2003
    Location
    Goleta, CA
    Posts
    5,550

    Early Payment Discounts

    I have considered offering my larger customers early payment discounts of 1-2 percent. Is anyone else doing this and how satisfied or unhappy with the results have you been?

    Billing for larger customers is usually net 30 and smaller is net 3 .
    Last edited by cywkevin; 02-21-2008 at 02:39 PM.
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  2. #2
    Join Date
    Sep 2003
    Location
    Washington, USA
    Posts
    3,219
    Offering early payment discounts should be aimed at reducing the accounts that end up being uncollectible. So what we do is offer early payment discounts only to clients that have demonstrated problems with paying on time in the past. So far it has worked well for us and the number of unpaid hosting bills has dropped over the past several months.
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  3. #3
    Join Date
    Jun 2002
    Location
    Sydney, Australia
    Posts
    1,745
    We don't offer discounts for paying early/on-time. We've found that having late fees written into our T&C is more of an incentive to get people to pay on time.

  4. #4
    Join Date
    Oct 2007
    Location
    Hong Kong
    Posts
    1,248
    In our market yearly payments are the standards and therefore we don't have any incentive to offer early payment discounts...
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  5. #5
    I think that's a good idea. 1-2% is too little though. Make it 5.

  6. #6
    Join Date
    Mar 2004
    Posts
    550
    Our customers pay in advance, on a yearly basis. Our terms are Net 30 with no discount for early payment. In reality, we only get paid within 30 days about half the time, as all our customers are large institutions with acres of bureaucracy. However, they always do pay, even if it takes a while.

  7. #7
    I think an early payment discount will end up costing you money in the long run. 1 to 2% doesn't seem like much but when added up over several clients it can make a difference. On top of that I don't believe the discount will cause more clients to pay on time. If you have a client paying $20 dollars per month and they are provided with a 2% discount it saves them 4 cents. Thats not much of an incentive to me.

  8. #8
    Join Date
    Jan 2008
    Location
    St. John's, NL
    Posts
    2,114
    Quote Originally Posted by ozborn View Post
    I think an early payment discount will end up costing you money in the long run. 1 to 2% doesn't seem like much but when added up over several clients it can make a difference. On top of that I don't believe the discount will cause more clients to pay on time. If you have a client paying $20 dollars per month and they are provided with a 2% discount it saves them 4 cents. Thats not much of an incentive to me.
    Actually, it's 40 cents
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  9. #9
    Sorry math was never my major.

    Still though, 40 cents isin't much of an incentive for me.

  10. #10
    Join Date
    Mar 2004
    Posts
    550
    Quote Originally Posted by ozborn View Post
    I think an early payment discount will end up costing you money in the long run. 1 to 2% doesn't seem like much but when added up over several clients it can make a difference.
    Part of this difference can be made up by having use of that money earlier than planned. It could be put in short-term deposits and earning interest in the bank. Or it could be used in the operation of the business. If the company's ROIC is fairly high (i.e. above bank interest), then this might work out quite well. There are some industries (FMCG retail, for example, due to inventory turns), where cashflow management is the key to profitability.

  11. #11
    Join Date
    Jul 2003
    Location
    Goleta, CA
    Posts
    5,550
    A typical large customer puts down $500 so a 2% discount is around $10
    Patron: I'd like my free lunch please.
    Cafe Manager: Free lunch? Did you read the fine print stating it was an April Fool's joke.
    Patron: I read the same way I listen, I ignore the parts I don't agree with. I'm suing you for false advertising.
    Cafe Owner: Is our lawyer still working pro bono?

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