Invoice OCR
Read a scanned or photographed invoice into text, in your browser, with nothing uploaded.
Invoice Discount Calculator
Work out a discount, what it costs you, and whether the customer should take it.
Quick Tool Overview
The Invoice Discount Calculator works out a percentage or fixed discount, applies it before tax as the law requires, shows what it costs your margin, and prices a settlement discount as an annual return — which for 2/10 Net 30 is about 37%.
- What it does
- Works out a discount and what it costs you
- You give it
- The amount, the discount and the days saved
- You get back
- The new total, the tax effect and the annualised cost
- Best for
- Deciding whether to offer one
About the Invoice Discount Calculator
A discount on an invoice is three calculations, not one. What comes off the price. What that does to the tax, which has to be charged on the reduced amount rather than the list price. And, for a settlement discount, what it is actually worth to the customer as an annual return — which is the figure that decides whether they take it.
That last one surprises people. A 2% discount for paying twenty days early is an annualised return of about 37%, which is why any buyer with cash takes it and why offering one is an expensive way to improve your cash flow. This shows the annualised rate so the decision is made with the real number in front of you.
It also handles the ordinary cases properly: percentage and fixed-amount discounts, discounts applied before tax as they must be, and the margin effect — what a 10% discount does to a job priced at a 35% margin is not a 10% reduction in profit, it is a 29% one.
Key features of the Invoice Discount Calculator
Discount before tax
Tax is charged on what you charged, not on the list price.
Annualised settlement cost
The number that decides whether a buyer takes it.
Margin effect
A 10% discount on a 35% margin removes 29% of the profit.
Percentage or fixed
Both, with the effective percentage shown either way.
Shown as a line
Because hiding it in the unit price costs you the next negotiation.
How to use the Invoice Discount Calculator
-
1
Enter the invoice amount
Before any discount, excluding tax.
-
2
Set the discount
A percentage or a fixed amount off.
-
3
Add the tax rate
The discount comes off before tax, which is what the law requires.
-
4
For a settlement discount, add the days
How many days early the customer has to pay to earn it.
-
5
Read the annualised cost
What the discount is really worth, as a rate per year.
Frequently asked questions
After. Tax is charged on what you actually charged, which is the discounted amount, not on the list price you decided not to charge.
Roughly the discount percentage divided by the remaining percentage, multiplied by 365 over the days saved. A 2/10 Net 30 discount works out at about 37% a year, which is why buyers take it.
Far more than the percentage suggests. On a 35% margin, a 10% discount removes 29% of the profit, because the discount comes entirely out of the margin rather than out of the cost.
Yes, as its own line with the percentage. Quietly reducing the unit price hides the concession and makes the next negotiation start from the lower number.
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