Thursday, October 23, 2014

What is credit period? Definition and Meaning

Credit Period means a discount facility from the seller and its also cash discount. I am going to an example and it will make more sense.
writing approach of credit period is "2/10 net 30" so 2/10 net 30 is an example of credit period. its mentioning that if buyer pay all the cash to seller they(seller) will provide 2% discount on sale that is 2/10 and here net 30 indicating that from the date of sell buyer will have to pay all the money within 30 days from the date of sale.
If buyer delay more than 10 days that time they (buyer) will not get the discount offer but they will able to pay those money within 30 days.
So 2/10 net 30 means if buyer pay all the money to seller that time seller will give 2% discount on sale other hand if they cross 10 days they will not get the opportunity of discount but they have to pay within 30 days.
Its an cash discount opportunity system. Most of the time seller need cash money that time they give this discount offer to the buyers, in this way buyer become happy and seller get the current money within short period of time.