Show the discount, do not hide it
A discount belongs on its own line, with the full price still visible above it. Quietly reducing unit prices makes the concession invisible — which means the customer never registers that they received one, and your next full-price invoice looks like a price rise.
Percentage or fixed amount?
| Feature | Percentage | Fixed amount |
|---|---|---|
| Best for | Volume deals, loyalty, seasonal offers | Goodwill gestures, rounding, agreed reductions |
| Scales with the invoice | Yes | No |
| Reads as | A policy | A one-off |
| Risk | Costs more on large invoices than you may intend | Trivial on a large invoice, significant on a small one |
Where the discount sits in the arithmetic
Subtotal, then discount, then tax on what remains, then any delivery charge, then the total.
| Line | Amount |
|---|---|
| Subtotal | 1,250.00 |
| Discount 15% | -187.50 |
| Taxable value | 1,062.50 |
| VAT 20% | 212.50 |
| Delivery | 35.00 |
| Total | 1,310.00 |
Discount before tax matters: it is the discounted amount the customer actually pays, so that is the value tax is due on.
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Give the discount a reason
A labelled discount is worth far more than an unlabelled one. “Discount — 15%” is a number. “Loyalty discount, 15% — fourth order this year” is a reason to place a fifth. It also protects you: a discount with a stated cause is clearly this invoice, not a new baseline price.
Useful labels: introductory offer, volume discount, loyalty discount, early payment discount, agreed goodwill adjustment, referral discount, seasonal promotion.
Discounting a single line
To reduce one item rather than the whole invoice, adjust that line’s rate and note the original price in the detail line beneath it — “List 120.00, agreed at 95.00”. That keeps the concession visible without applying it to everything else.
Early payment discounts
An early payment discount is conditional, so it should not be deducted on the invoice. State the offer in the terms — “2% discount if paid within 10 days” — and issue a credit note if the customer takes it. Deducting it in advance and having the customer pay late leaves you chasing a small balance nobody wants to process.
Mistakes to avoid
- Applying tax before the discount. Overcharges the customer.
- Discounting silently. The goodwill is wasted.
- A permanent “discount”. If it is on every invoice, it is your price.
- Discounting instead of scoping. When a customer says a quote is too high, remove something rather than reducing the price for the same work.
- Forgetting the deposit. A deposit already paid is a deduction, not a discount. Show it as its own line.
Questions
Should a discount be applied before or after tax?
Before. Tax is due on what the customer actually pays, which is the discounted amount.
How do I discount only one item?
Reduce that line’s rate and note the original price in the detail line, so the concession is visible without applying to the rest of the invoice.
Should early payment discounts be deducted on the invoice?
No — they are conditional. State the offer in the terms and issue a credit note if the customer qualifies.
Is a deposit a discount?
No. A deposit is money already received. Show it as a separate deduction line, clearly labelled, with the date it was paid.
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