Cash Discount

Written by True Tamplin, BSc, CEPF®

Reviewed by Subject Matter Experts

Updated on February 22, 2023

Definition: Cash Discount

Cash discount is a rebate or allowance from the amount due granted by the creditor to the debtor at the point when the debtor makes payment before the due date.

Cash discount is offered to encourage early payment.

If payment is due within a specified period after the invoice date, the number of days should be mentioned (e.g., if there are 10 days to make the payment, then it can be expressed as n/10).

It means that if the payment is made before the due date, then the discount will be allowed to the purchaser.

In case the payment is made after the due date, cash discount will not be granted. The number of days is preceded by the rate of discount, and it is expressed as 5/10.

This means that if payment is made before the due date, then a 5% discount will be allowed to the purchaser.


Let's consider some examples of these expressions:

  • 2/10, n/30: This means that there are 30 days in total to make payment. If the payment is made within 10 days, then a 2% discount will be given to the purchaser.
  • 5/15, n/30: This means that the total number of days available to make the payment amounts to 30. Also, a discount of 5% will be given to the purchaser if payment is made within 15 days.

Cash Discount FAQs

About the Author

True Tamplin, BSc, CEPF®

True Tamplin is a published author, public speaker, CEO of UpDigital, and founder of Finance Strategists.

True is a Certified Educator in Personal Finance (CEPF®), author of The Handy Financial Ratios Guide, a member of the Society for Advancing Business Editing and Writing, contributes to his financial education site, Finance Strategists, and has spoken to various financial communities such as the CFA Institute, as well as university students like his Alma mater, Biola University, where he received a bachelor of science in business and data analytics.

To learn more about True, visit his personal website or view his author profiles on Amazon, Nasdaq and Forbes.