"Paying bills is a major concern for any business, so let's talk about it. There is a more efficient way to do this that will help your company save money. Early payment discounts are what they're called. Here, you might receive a small discount by paying your bills a little early.
What are Early Payment Discounts in Accounts Payable?
Sellers give Early Payment Discounts (EPDs) to customers who pay their bills before the due date. EPDs are basically a cash reward. A small percentage of the invoice amount is generally given as a discount. This is good for both parties. It's a smart move for businesses to speed up cash flow and lower days sales outstanding (DSO), which is a key measure in financial analysis. For buyers, it means they can save money, which can be a very appealing offer. Discounts for paying your bills early are like a small thank you from the business to the customer for paying their bills on time. The buyer saves money and the business gets its money faster. A business needs to build trust with its people in order to make money, but it's not just about the money."