Two percent for twenty days is a 37% loan

Settlement discounts look like a rounding error on the invoice. Converted into an annual rate, they are usually the most expensive money in the business.

By Steve 5 min read
Abstract bridge artwork for Two percent for twenty days is a 37% loan

A settlement discount is the rare pricing decision that gets made without anyone treating it as pricing. It appears at the bottom of an invoice template, or in a conversation about slow payers, and it feels like housekeeping. Two percent off if they pay inside ten days. Small number, small consequence. It is not a small number. It is an interest rate, and once you express it as one, the decision looks entirely different. The arithmetic that makes it a rate Take the standard construction: 2% off for payment within…

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Important: General information only. Rialto Bridge articles describe patterns and considerations that may apply to a business; they are not financial, legal, tax or accounting advice, and they take no account of your particular circumstances. Consider your own situation and seek advice from a qualified professional before acting.

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