Early-payment discount (Skonto): definition and calculation

An early-payment discount (Skonto) is a price reduction a supplier grants if an invoice is paid within a short period, for example "2 % discount if paid within 14 days, net 30 days". Pay within the window and you pay less; miss it and you pay the full amount. Annualised, the discount often equals an interest rate above 40 %, and construction firms leave a lot of money on the table here, especially on building materials.

What is Skonto?

Skonto is a payment term. The supplier grants you a payment period (say 30 days) and rewards earlier payment within the discount period (say 14 days) with a percentage deduction. Economically it is supplier credit: if you wait until the due date, you "borrow" the invoice amount for the difference in days, at a very high price.

Typical payment terms in the German building-materials trade:

• 2 % discount within 10 or 14 days, net 30
• 3 % discount within 8 or 10 days, net 30
• deviating rules from framework contracts, such as a discount on materials only, not on freight

Calculating the effective annual interest rate

To compare the discount with credit interest, convert it into an annual rate. The usual approximation is:

Annual rate ≈ discount rate × 360 ÷ (payment period − discount period)

It becomes more precise if you account for the fact that you only finance the reduced amount when taking the discount:

Annual rate = discount rate ÷ (100 − discount rate) × 360 ÷ (payment period − discount period) × 100

For "2 % within 14 days, net 30":

• Approximation: 2 × 360 ÷ 16 = 45.0 %
• Exact: 2 ÷ 98 × 360 ÷ 16 × 100 = 0.02041 × 22.5 × 100 = 45.9 %

For "3 % within 10 days, net 30":

• Exact: 3 ÷ 97 × 360 ÷ 20 × 100 = 0.03093 × 18 × 100 = 55.7 %

No overdraft costs anywhere near that. Taking the discount is therefore almost always worth it, even if the payment temporarily runs through the credit line.

Worked example: financing the discount with an overdraft

A building-material invoice of €50,000 net, i.e. €59,500 gross including 19 % VAT, with 2 % discount within 14 days, net 30. The firm pays on day 14 via its overdraft (9 % interest p.a.) instead of on day 30.

Of the €1,190 discount, €190 is VAT, which also reduces deductible input VAT. That leaves €1,000 of gain, or about €760 after interest, on a single invoice. Scaled to annual spend this becomes a large sum: at a typical 3 % discount, up to €150,000 a year on €5 million of spend, if every supplier grants it and every deadline is met.

Why construction firms miss the discount

The terms are negotiated and the money is there, yet deadlines lapse. The reasons almost always lie in the process:

• Slow invoice verification: the invoice reaches the office while the delivery note is still on site. By the time both are together, 14 days have passed.
• Approval chains: site manager, senior site manager, accounting. Every step costs days, especially during holidays.
• Disputed items: a single disputed line often blocks the entire invoice instead of the undisputed part being paid on time.
• Rigid payment runs: paying once a month systematically misses every 10- or 14-day window.
• Unclear start of the period: nobody has recorded whether the period runs from invoice date, receipt or delivery.

Caution with §13b, progress payments and retentions

Some special cases should be clarified with your tax adviser (Steuerberater) or legal team; this section is not tax or legal advice.

• §13b UStG (reverse charge): mainly affects invoices for construction services, such as from subcontractors, and usually not pure material deliveries from a merchant. The invoice shows no VAT; you owe it yourself. If you take a discount, the tax base falls and the self-assessed VAT has to be adjusted.
• Progress invoices (Abschlagsrechnungen): whether the discount applies to each progress payment or only if all payments are made on time depends on the agreement. An unclear discount clause frequently leads to disputes.
• Retentions: with security retentions, clarify whether the discount is calculated on the amount paid out or the full invoice amount.
• Construction withholding tax (Bauabzugsteuer): for construction services without a valid exemption certificate, 15 % has to be withheld and paid to the tax office, which must be reflected in the payment.

Common mistakes

• Deducting the discount after the deadline: the supplier claims it back and the relationship suffers.
• Not correcting input VAT after the discount.
• Counting the discount in the bid comparison (Preisspiegel) but not actually taking it in daily operations.
• Paying unchecked just to meet the deadline, so short deliveries and price errors get paid too.

How Streckenheld helps

Streckenheld reads every invoice with AI, including payment terms and the discount deadline, and matches it against the order, order confirmation and delivery note. Verification takes days instead of weeks, so deadlines are met without paying unchecked invoices. Payment terms are checked against the framework contract. Approved invoices are exported as a SEPA credit transfer file, with each payment's execution date set by the invoice's discount deadline.

Learn more on the invoice verification page, in the AI reconciliation guide and in the article on the four-way match.