My supplier's price list says trade discount 30/10/5; what is my net cost?

How the calculator reads a discount chain

Supplier and distributor price lists sometimes write the discount as 30/10/5. That means three discounts in sequence, perhaps a trade discount, a quantity discount and a promotional one. This is what the calculator's 'Discount steps' table shows:

Add the rates and you would expect a cost of 550, which is 48.5 lower than reality. That gap does not show on the supplier's invoice; it shows in your margin.

The steps

1. Open the Discount calculator and type the item's list price.
2. Type 30 as the first discount.
3. Press 'Add another discount' and type 10, then add a third and type 5. Up to six discounts are accepted.
4. Read the final price, which is your net cost, and the equivalent single discount you compare suppliers on.

Compare suppliers on the equivalent discount

A second supplier offers 35/10 on the same list price, and a third offers a single 40. Which is cheapest? The terms look different, and the equivalent discount puts them on one scale:

The offer with fewer discounts, 35/10, is the cheapest here. That only holds when all three quote the same list price; if the list prices differ, compare final prices, not rates.

Once you know the net cost

• Use the net unit cost as the price on your order in the Purchase-order generator, so it matches what you agreed with the supplier.
• Use the net cost, not the list price, when you work out your margin in the Profit margin calculator.
• The order of the discounts does not change the final cost, but it changes each step's amount. If a supplier ties one discount to a volume condition, read its money value from the steps table.