Discount Definition and Meaning 2
How is a discount calculated?
You now know the goals that you are pursuing by granting a discount. But of course you always have to make sure that your discount campaigns do not adversely affect your profit. It is therefore important that you calculate your discounts precisely in advance. This means that you always have to add the discount to the sales price in advance as part of your price calculation . Please note that you always have to calculate the discount from the customer’s point of view. This means that the offer price, i.e. the list sales price, always corresponds to 100%. This results in the following calculation method for you:
Target sales price + discount in% = list sales price (100%)
How much is the discount normally?
The discount is usually given as a percentage. How high the discounts are varies depending on the industry and type of discount. For example, you can get a discount of up to 20 percent when buying a new car . In the area of fashion and clothing even 50% and more are possible, for example in the well-known and popular sales.
As a rule, however, discounts are always in the order of magnitude between 5% and 20% .
What legal regulations are there on the subject of discounts?
In 2001 the discount law that had been in force since 1933 was repealed. This meant that the limit of 3% applicable up to this point in Section 2 Discount Act could be exceeded. It was no longer possible, also for reasons of competition law, to contest a higher discount. Nevertheless, a distinction must still be made between permitted and non-permitted discounts.
What discounts are allowed?
|Flat rate discounts for specific groups of customers. This can be, for example, discounts for children, seniors, students, etc.|
|individual discounts are also permitted. These can, for example, be granted to a customer during price negotiations.|
|Flat rate discounts on certain categories of products. Swimwear, winter fashion, etc. can be cited as examples.|
|Discounts in the form of coupons or vouchers.|
Which discounts are not allowed?
|Discounts with which excessive advertising is made and which are granted at very short notice.|
|Discounts That Are Misleading. This happens, for example, if the discount campaign is very long-term and the discounted price becomes the normal price.|
|The so-called moon prices are not permitted. This means that prices were initially set extremely upwards and then downwards again through discounts.|
How is the discount treated in the bookkeeping?
In the bookkeeping, the discount must be treated differently. You have to differentiate between subsequent discounts and immediate discounts . This is necessary so that you can book the discounts correctly.
Because the full price is never paid with an instant discount, an instant discount cannot be booked. Only the net amount that has been paid is included in the booking.
However, subsequent discounts must be booked by you. Please note that you have to post the full price including sales tax . If you grant a discount later, for example the annual discount, you have to clean up the affected accounts accordingly. The discount is posted to the customer bonus account. At the end of the year you offset this against the revenue account and use it to correct the total revenue . For the buyer, i.e. your customer, the discount reduces the cost price.
Criticism of the discount
There is always criticism that the discount could give customers the impression that they can purchase a product of high quality at a particularly low price. But in truth it is rather the case that the actual value of the goods remains hidden from the customer. As a rule, the customer always looks at the original price (instead of € 100, only € 75). Many retailers take advantage of this customer behavior. They set much higher prices , so-called moon prices, and suggest to the customer that they have made a special bargain. But it can happen that the customer pays an overpriced price despite the discount. The press discount, also known as the journalist discount, is also very much criticized. Above all, the anti-corruption organization Transparency International fears an immediate abolition. They see this discount as a possible form of bribe or gain in terms of reporting.
Discounts are an important tool for companies to use them to pursue and achieve specific goals. These goals range from strengthening customer loyalty to creating a competitive advantage. Discounts must be distinguished between permitted and non-permitted discounts and these regulations must not be violated. Or rather, it shouldn’t be violated, because not everyone is so specific here. When calculating discounts, it is always important to ensure that profits are not reduced.