Discount Terms

Hi all,

Can anyone advise if there is a law preventing offering discount to one customer as opposed to another.

My main problem is that some customers are taking discount for early payment but in actual fact are going over 30 day terms significantly some as much as 60 days but deduct the discount as amatter of course.
This has being going on for years but I didn't want to rock the boat.
Now Cashflow is hurting so I want to stop them taking 3% from my bottom line.

I was hoping to "Hide" behind legislation and say that they were at an unfair advantage over other customers.

Anyone experience something similar?

"Dear <customer>
Our auditors have reviewed the business and noted the ongoing 3% reduction despite the fact that the terms of the discount have not been met. Their advice is to make a claim for arrears plus interest. On foot of the advice, I am ceasing to offer a 3% reduction and would like to request a meeting with you to discuss the arrears issue in the hope that we can come to a mutually acceptable solution"

Framed like that I'd be fairly sure you will get your discount cancelled

Other alternative is to leave it as is, raise prices by 5% and then in a couple of months bring up the fact that the discount only applies for accounts paid within 30 days.

how you proceed depends on a number of factors Are the customers involved very important? Is your product important to them? How are you prices compared to your competitors? If your coustomers have been taking this discount for years its going to be very hard to change them without causing some ill will to develop.
I would say put up the prices to reflect the discount they are taking blame the increase on general costs

Thanks amgd,
Good idea however wouldn't like to be on the receiving end of your missives.
Problem is we have set price list so can't just change our price list for some customers over others. Particularly in the current market.

Dinjoe,
Yes they would be some of the larger customers. We are getting queries from some asking what discount we offer others and don't want to admit.

Our terms are 30 days so I think that's the card I'll play.
Surely they cant expect a discount for quick payment and pay later than everyone else?

I was hoping there was alaw which prevented allowing discount with one customer versus another.

tatler said:

I was hoping there was alaw which prevented allowing discount with one customer versus another.

Click to expand...

Thank God there isn't

Best thing is to say all prices are net net If they are big customers and you have some margin you could try tie them in to a rebate at years end based on them acheving a target .This helps to get more sales and give bigger customers what is effectivly a discount

of course there is a law its called contract law. Terms of payment are part of your contract with the customer. If you have clearly stated that discount applies to early payment and payment is after the term then your customer is not entitled to the discount.
Indeed if your customer pays after the30day term you can (by EUlaw) hit them with admin charge and interest.
If they are not paying on time they are not a good customer - bad cash flow caused bankruptcy.
I write to all my customers who havent paid by the date given the next day pointing out that if payment is not forthcomimg there will be an admin charge of € 10.00 plus 10% interest.
The day after the letter goes out I call them.
To date all but one have paid within 5 days of receiving the first letter and have apologised and still remain my customer.
The one who didn't pay within the 14 days was charged admin and interest, which he paid and was then told that in future a 10% deposit would be required. If he doesnt come back well and good.
In a number of other european countries this is standard practice. A lot of compainies look on paying late as being a game.