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Cost of trade credit to the customers

On the commercial side often we do see something similar in managing accounts receivable. One such standard policy or practice is termed 1/10Net30 - where the customer can take a 1% cash discount off of the invoice if paid within 10 days otherwise they pay the full amount within the normal 30 days. This provides an incentive to pay early and reduce DSO. However, is it worth the 1%? Also where might we put this discount amount in our financials? Thanks

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COST OF FORGOING 1% CASH DISCOUNT if payment Within 10 days rather than paying at 30 ...

Solution Summary

This explains the steps to compute the COST OF TRADE CREDIT TO THE CUSTOMER

$2.19