What is the difference between trade discounts and cash discounts?
Trade discounts are payments to distribution channel members for performing some function. For example if you had a warehouse, stocked my goods in your warehouse, and then shipped my goods to my customers for me. You would offer me an invoice with your trade discounts. The discounts could be 10/15/10 Net 30. In the example 10% could indicate a 10% discount for warehousing the product, an additional 15% discount for shipping the product, and an additional 10% discount for keeping your shelves stocked. You are correct about the cash discounts, in most cases they are offered to a business’s customer as an incentive to pay the bill faster. Example 3% 15 Days Net 30. If the customer pays the invoice in 15 days they will receive a 3% discount from the invoice.
