Is the payment discount allowed only if the check is received within the specified discount period?
We have a customer who mails the check the day it is due and takes the discount.
This is a great question. Unfortunately many suppliers tend to take early payment discounts even though they know their payments will not be received by the early payment discount deadline.Therefore, it is really a judgement call as to whether or not you bring this to your customer’s attention or not. If the payment is only a day or two late I recommend you let it go. However, it if is later than that you could always stop offering early payment discounts or you could speak with the person who is responsible for sending payments and make sure they know what your policy is on taking early payment discounts.
Check out a couple of our guide that includes best practices and guidelines on how to set the right payment terms for your customers, Understanding Early Payment Discounts and Setting the Right Payment Terms for your SMB.
All the Best-
Crystalynn Shelton, CPA