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- Ten Tips on Deduction Management
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- Asserting the Ordinary Course of Business Defense to a Bankruptcy Preference Demand; Ten Tips
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- Tips for Handling Unearned Discounts
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- Comments about Risk Management
- Ten Comments on the Roles and Responsibilities of the Credit Department
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Tips for Handling Unearned Discounts
Some customers will attempt to take advantage of creditors by taking unearned cash discounts. Recognizing that the purpose of offering cash discounts is to encourage early payment, unearned discounts must be charged back. Requiring customers to repay unearned cash discounts can strain business relationships with customers. However, failing to charge back uneasrned discounts will only encourage customers to take unearned discounts more often.
One of the more common complaints is that the clock on the discount period should begin only the merchandise is delivered. For this to work, a credit or would need to know the delivery date of each order, and would need to be able to adjust the discount due date based on the delivery date.
Consider establishing a specific policy relating to allowing or rejecting unearned cash discount meaning that if you create a grace period, stick to it. Charge back unearned discounts. Do not return checks uncashed that include unearned discounts.
© 2011 by Michael C. Dennis. All Rights Reserved