Invoices, Trade Discounts and Cash Discounts

The path merchandise travels as it moves from the manufacturer through wholesalers and retailers to the ultimate consumer is known as a channel of distribution or trade channel. The businesses that form these channels are said to be “in the trade.” In today’s complex economy, a number of different trade channels are used to move goods and services efficiently.

Trade discounts are reductions from the manufacturer’s suggested list price. Trade discounts are reductions from the manufacturer’s suggested list price. They are given to businesses at various levels of the trade channel for the performance of marketing functions. These functions may include activities such as selling, advertising, storage, service, and display.

List price is the suggested retail selling price of an item set by the manufacturer or supplier. The original price from which discounts are taken. Manufacturers print catalogs showcasing their merchandise. Often these catalogs contain the manufacturer’s suggested list or retail prices.

Trade discounts are sometimes quoted as a single discount and sometimes as a series or chain of discounts. The number of discounts is dependent on the extent of the marketing services performed by the channel member.

Invoices are a comprehensive record of a sales transaction. They show what merchandise or services have been sold, to whom, in what quantities, at what price, and under what conditions and terms. They vary in style and format from company to company, but most contain essentially the same information. Invoices are used extensively in business, and it is important to be able to read and understand them.

The terms of sale are the details of when the invoice must be paid and whether any additional discounts will be offered. To encourage them to pay the bill earlier than the net date, or due date, sellers frequently offer buyers an optional extra discount over and above the trade discounts. This is known as a cash discount.