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How much discount should I grant on my invoice?

If there’s something we can all appreciate, it’s a sale. Everyone loves a good bargain. This is no exception when it comes to invoicing - who doesn’t want to pay a little less on a bill?

As an entrepreneur, this is an applicable strategy for appealing to customers and encouraging fast payment of an invoice. A discount can be an effective marketing tool if used correctly and selectively, providing your business with new customers and a higher turnover.

Everyone loves a sale - on anything from services to muffins! With Debitoor invoice templates, it's easy to apply a discount.

There are several different types of discounts you can offer. The most common ones include:

  • Quantity discounts - a discount offered on a large order
  • Special discounts - seasonal, limited time, etc
  • Loyalty discounts - for repeat customers
  • Volume discounts - after a customer reaches a certain amount/number of orders
  • Referral discounts - customer receives discount for a successful order from a referral

While you might hear them called different names, the guiding principle is the same behind all types of discounts: encouraging purchases and swift payments.

It should also be noted that not all discounts are legal. For example, an illegal discount would be a seasonal sale on inflated prices (pricing the products above the usual price, then offering a temporary discount on the increased price).

How much of a discount is best?

The next step in adding a discount to your invoices is to determine how much to offer. This can be done either by a flat rate or a percentage of the invoice total. The percentage approach is generally the more common, as the totals for products or services usually vary by order.

Percentage discounts have a large range, but generally fall between 5% - 20% of the total. However, some industries, such as fashion offer discounts as high as 50% (or more!).

So it makes sense to do some research within your own industry: are discounts commonly granted? What kind of discounts do you see offered by competitors? What is the range these discounts fall in?

The answers will provide you with a good set of guidelines for your own discounts offers, and can even also provide you with an indication of which are more effective. You can also use your own opinion as a reference point - what kinds of discounts do you prefer? What is fair from a customer perspective?

If you’re planning ahead, you can even include discounts when considering your budget for the quarter.

The invoice: how to calculate the discount

Once you decide on a type and percentage to discount, the calculation part is fairly straightforward.

For example, if you decide to provide a quantity discount of 10% on an order total of £3,400, you would provide a discount of £340. Calculation: invoice total / 100 x discount percentage = discount rate.

But if you’d prefer to avoid the maths, invoicing software like Debitoor will automatically calculate the amount for you, based on the percentage that you select.

Working with online invoices comes with some other advantages as well:

  • You can set discounts for each invoice
  • The discount is automatically calculated
  • The invoice template helps you avoid common invoicing errors

Just to name a few. But don’t take our word for it - give it a try yourself with 7-days free trial of Debitoor.