Customer Discounts Based on Total Invoiced Effort

Introduction

Many businesses apply discounts based on a single invoice's value, but a more strategic approach is offering discounts based on the total invoiced amount across financial years. This ensures customer loyalty and fair pricing.

How to Apply Customer Discounts Based on Total Invoiced Effort

Understanding the Graduated Discount Structure

Instead of calculating discounts on each invoice separately, customers should receive discounts based on their cumulative net effort-based sales over time. Here’s how the graduated scale should work:
 
Total Invoiced Amount (Effort-Based Sales) Discount Rate
0 - 100,000 No discount
100,000 - 200,000 5% discount
200,000 and above 10% discount

Key Rule: A customer qualifies for a discount only when their total net effort-based sales exceed 100,000.

Example Scenario: How Discounts Are Applied

Scenario 1: Customer Just Reaches Discount Threshold

  • Customer’s total billed amount so far: $99,000
  • Current invoice amount: $3,000
  • Eligible amount for discount: $2,000 (the amount exceeding $100,000)
  • Discount applied (5% of $2,000): $100

Scenario 2: Non-Eligible Effort-Based Billing

  • Total invoiced amount: $150,000
  • Effort-based portion: $90,000
  • Reimbursable expenses (airfare, living expenses, visa fees, etc.): $60,000
  • Conclusion: Since the effort-based billing is below $100,000, no discount is applied.
Important: The discount only applies to effort-based billing, not to pass-through costs like travel reimbursements, visa charges, or any other non-effort-related expenses.

Where to Configure This Discount Setup?

To ensure accurate and automated discount application, consider the following configuration approach:

1. Use Rebate Condition Types & Condition Records

  • Set up rebate condition types that define the discount structure.
  • Maintain condition records to track total effort-based sales across financial years.

2. Exclude Reimbursable Expenses from Discount Calculations

  • Configure a separate line in the pricing procedure that determines the rebate basis.
  • Ensure only effort-based billing is considered for the discount.

3. Implement Discounts via Rebate Agreements and Credit Notes

  • Since discounts apply across multiple financial years, direct invoice-level application isn’t feasible.
  • Instead, handle discount settlements through periodic credit notes using rebate agreements.

Final Thoughts

Applying discounts based on total invoiced effort rather than individual invoices promotes fairness and long-term customer engagement. By configuring rebate agreements and condition types, businesses can ensure a seamless, automated discount process that excludes reimbursable expenses. 

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