Anticipation

Some vendors may discount your purchase when payment is made before even receiving an invoice. This anticipation discount is based on the number of days between the payment date and the invoice date, so the earlier you pay the greater the discount you receive. The anticipation discount rate is the percentage used to calculate the discount amount. this type of discount is primarily used in the retail industry.

You can define anticipation discount terms for a multiple payment or split terms code. If you define a terms code for anticipation invoices, you must define an anticipation discount rate for each accounts payable vendor that uses the terms code.

Calculation

To calculate the discount amount for an anticipation invoice, the application

  • subtracts the invoice payment date from the invoice due date to calculate the number of days paid early,

  • divides the number of days paid early by 365 days,

  • multiplies the result by the anticipation discount rate, and

  • multiplies the result by the payment amount to calculate the discount amount.

((days paid early / 365 days) * (anticipation discount rate)) * payment

Example

Assume payment for an equipment purchase valued at $100,000 is made 10 weeks (70 days) before being invoiced. The anticipation discount rate is 10%.

  • Days paid early = 70

  • 70 / 365 = 0.19

  • 0.19 * 10% = 0.04

  • 0.04 * 100,000 = $4,000 discount