Trade Discount vs. Cash Discount
What is Trade Discount?
A trade discount is the concession, incentive or the deduction given by the seller to the buyer at the time of the purchase of the products. The main objective behind this type of discount is to engage the buyer to a greater extent and let him buy more and more products. No records of these discounts are kept in the record books by the both parties, seller or the buyer; they are initiated purely to have bulk sales. The trade discount can be given on both the credit and the cash payments. Mostly the trade discount directly depends on the volume of purchase; as the purchase increase, the discount offered gets higher. The trade discount can also vary from vendor to vendor or due to the type and quantity of the product purchased. There is various type of trade discounts given to the buyer; some of the prominent trade discounts are on the purchase of bulk items, repeatedly purchase by the buyer, purchase of the goods in the bulk and the year-end discounts.
What is Cash Discount?
A cash discount is the concession, incentive or deduction in the invoice of products at the time of payment of the purchases. The actual reason for the cash discount is to ensure the payment of product by the buyer within the specified time with avoiding the credit risk. Such discount is kept on record by both the seller and the buyers. Cash discounts are the rewards offered by the sellers to the buyers as the make early payments with avoiding the credit risks. The terms and conditions for this type of discounts are pre-prepared and are set as the contractual agreement between both the parties. The other major reason far proving these accounts is the cash payment of invoice instead of the payment through checks or the credit cards. The standard payment period is kept in between the 15-30 days by the seller, and those make early cash payment early then this time are offered the discounts.