Comments on: The Straight Skinny on When to Offer Early Payment Discounts

By: Marc Weeks

Marc Weeks — Tue, 03 Nov 2009 19:30:02 +0000

As a buyer how do I know when it is better to accept an early pay discount vs longer pay terms?

example: is 2%10 net 30 better than net 60 pay terms ?

By: crazyunicorn

crazyunicorn — Sat, 25 Jul 2009 23:18:20 +0000

barkingunicorn is so smart on his mouth. quite amazing for a guy who only fishes

By: Truth About Early Payment Discounts | scHammond Advisors

Truth About Early Payment Discounts | scHammond Advisors — Wed, 22 Jul 2009 12:24:44 +0000

[...] In an effort to bring in cash small business owners are more inclined to offer discounts for early payment.

By: Barking Unicorn, Denver, CO

Barking Unicorn, Denver, CO — Mon, 13 Jul 2009 20:47:59 +0000

My new payment terms:

Pay me what you can, when you can, until you no longer feel indebted to me.

http://barkingunicorn.wordpress.com/about

I’m worth twice what I thought I was, so far. Makes sense. Economic theory says nobody buys unless he thinks he’s getting more than he’s paying. Guilt and debt-aversion help me pick up money I would leave on the table if I set the price.

Of course, this doesn’t work with corporations. They have no minds or consciences so cannot decide what to pay. You have to tell them and then beat it out of them. But I’m migrating out of that market.

By: William

William — Mon, 13 Jul 2009 20:30:18 +0000

Great interview, and some thoughtful ideas for all-sized businesses.

Perhaps the early payment discount strategy could be customized a bit:

> Early payment discounts for returning clients
> Early payment discounts by using PayPal (as noted earlier) or other electronic transaction means (as long as they cover the transaction fees!)
> Others?

I think the real idea is to have a solid relationship with your customers. If they aren’t able to pay on time or to take advantage of discounts, maybe ask them how you can work with them to make the process easier on both ends.

By: RedHotFranchises

RedHotFranchises — Sat, 04 Jul 2009 15:45:41 +0000

Early-payment discounts offer buyers an advantage only if they comply with the plan, and large vendors are able to offer them because the vast majority of buyers will not take advantage of the offer, but it wouldn’t make much sense for most Small Businesses. If your clients take advantage of the plan, then you’re paying out those huge annual rates on money you are now “borrowing” from your clients.

By: Jennifer Rai

Jennifer Rai — Fri, 03 Jul 2009 17:49:36 +0000

Great interview, worthwhile to read.

By: Anita Campbell

Anita Campbell — Fri, 03 Jul 2009 17:36:26 +0000

Hi Barking Unicorn,

Thanks for pointing that out.

Actually I’m quite sure John was doing a much simpler calculation equivalent to uncompounded monthly interest to annual interest, as here:

http://www.stoozing.com/mon2yr.htm

No matter how you look at it, the point still is valid — discounts cost money. Under your calculation they cost even more money.

– Anita

By: Barking Unicorn, Denver, CO

Barking Unicorn, Denver, CO — Fri, 03 Jul 2009 11:00:36 +0000

I have one client – only one, alas! – who pays me via PayPal. He uses its “batch processing” function which costs him only $1 to pay up to several dozen bills at once. No fees are deducted on the recipients’ end.

One day I emailed an invoice; went to the bathroom; and when I returned I had cash.

I drop whatever I’m doing when he needs something.

By: RedHotFranchises

RedHotFranchises — Fri, 03 Jul 2009 09:55:05 +0000

It is indeed very important for Businesses to get paid early. Great Strategy!