What type of discount is given when payment is made on or before a specific date?

A cash discount is a reduction in the invoice amount offered to encourage early payment. This type of discount is usually expressed as a percentage of the total invoice amount and is applied when the buyer pays within a specified time frame. It serves both the buyer and seller by improving cash flow for the seller and providing savings for the buyer.

In contrast, a trade discount is typically offered to retailers or wholesalers as an incentive for purchasing in bulk and does not pertain to payment timing. A seasonal discount is aimed at clearing out inventory by reducing prices during specific times of the year, while a promotional discount is used as a marketing tool to attract customers and can apply to specific products or time-limited offers. Each of these other discounts has distinct purposes and conditions, making the cash discount particularly focused on payment schedules.