Skonto

Skonto is a cash discount offered by a seller to a buyer for paying an invoice earlier than the due date. It is a common practice in many European countries, including Germany, Denmark, Sweden, Norway and neighboring regions, and is used to improve the seller’s cash flow and reduce credit risk.

Typically, skonto terms are stated on the invoice and expressed as a percentage and a time period, for example 2/10 net 30. This means the buyer may deduct 2% from the invoiced amount if payment occurs within 10 days; otherwise, the full amount is due within 30 days. Other common formats include 1% 14 days or 3% 7 days, with the exact terms varying by agreement.

In accounting terms, if a buyer takes the discount, the purchase is recorded at the discounted amount; if payment is made after the discount period, the full invoiced amount is recorded. For sellers, recognizing skonto as a reduction of revenue or as a separate “discount allowed” item depends on the accounting system and policy. VAT or sales tax treatment also varies by jurisdiction; in many places the tax base may be adjusted to reflect the discount, but rules differ and must be followed according to local tax law.

Skonto has advantages and considerations for both sides. It incentivizes prompt payment, improves liquidity, and can reduce carrying costs for buyers. For sellers, it can shorten receivables and reduce bad debts, but it also lowers revenue if discounts are frequently utilized. Effective use requires clear terms, reliable tracking, and alignment with financial objectives.