Retrospective Discount - Definition & Meaning
What is Retrospective Discount?
A retrospective discount is a type of discount that is received after the buyer pays the full price for the good/ service, after the invoice related to the purchase is prepared. It is like receiving a certain amount of money or certain benefits after the true amount is paid for the product that is purchased.
There are two major types of retrospective discounts, which are:
- Settlement Discounts:
A discount generally offered for prompt payment for any purchase. A settlement discount is rarely with a high value associated to it, and is offered quite promptly, after the purchase.
- Volume Discount:
A discount offered when a volume or turnover of a business increases or changes. It is generally done when business cycle changes for the better. This type of discount is also known as over rider discount. Volume discounts are paid on a periodic basis, and are accumulated to be paid quarterly, half yearly or annually.
Example:
Company A had to receive certain amount f money from company B. They hence laid out a clause of retrospective discount, wherein if company A paid the money by a fixed date, it would receive a 10% discount, post the purchase.
This article has been researched & authored by the Business Concepts Team. It has been reviewed & published by the MBA Skool Team. The content on MBA Skool has been created for educational & academic purpose only.
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