Early Payment Discount

Hi all,

Public Authorities are currently encouraged by central government to pay approved invoices in 10 days despite the fact the agreed payment period is likely to be 30 days from the date of the invoice.

I would like to consider paying some of my suppliers early but would expect an early settlement discount. What is the most beneficial way of calculating an early settlement discount. Any ideas please.

Edward

i have a few suppliers that offer a 5% early payment discount

Hi Edward

I would suggest that you contact your suppliers direct and ask what, if any, discount they are prepared to offer for prompt payments. This will vary between suppliers most probably and, should you be able to negotiate an individual discount - then you can make a choice as to paying early assuming that the benefits of doing so are in the best interests of your own business. I have seen suggestions regarding discounts on future work in receipt of prompt payments ("business-link" web site) rather than discounting as you suggest. Did they do 5% less work - I would doubt it. But it could possibly ease cash flow.

I just wish you were a customer of mine!! :)

Regards
Mark Shinkfield