Discount Calculator
What comes off, and what is left. Every result shows its working, so you can check it before you put it on a document.
The sum, and the one that trips people
A percentage off is the price multiplied by the percentage, subtracted from the price. Twenty per cent off 80.00 is 16.00 off, leaving 64.00.
Two discounts applied one after the other do not add up. Twenty per cent and then a further ten per cent is not thirty per cent off: the second cut is taken from the already reduced figure, so the total is 28 per cent.
Multiply the remainders instead. Eighty per cent of ninety per cent is 72 per cent of the original, so 28 per cent has come off.
What a discount actually costs you
A discount comes out of profit, which is a much smaller number than the price, so it bites harder than the percentage suggests.
Take an item costing 60.00 and priced at 100.00, a 40 per cent margin. Discount it by 10 per cent and you have given away a quarter of the profit. Discount it by 20 per cent and you have given away half.
The rule of thumb worth carrying: dividing the discount by the margin tells you the share of profit you just handed over.
Working the percentage out from two prices
If you know the old price and the new one, the discount is the difference divided by the original.
From 80.00 down to 64.00 is a difference of 16.00. Sixteen divided by eighty is 0.2, so 20 per cent.
Going the other way, a price that has been discounted by 20 per cent is restored by dividing by 0.8, not by adding 20 per cent back on.
Discounts, VAT and the order you do things in
Apply the discount to the net figure first, then work the VAT out on the discounted net. Discounting the gross gives a total that is right but a tax line that is not.
If you offer a prompt payment discount, invoice the full amount and issue a credit note when it is taken, or state the discounted terms on the invoice. Rules differ by country, so check what yours expects.
On a quotation, say whether the figures are before or after tax. It is the single most common source of an argument at invoice time.
Questions
- How do I calculate a percentage discount?
- Multiply the price by the percentage to get the saving, then subtract it. Twenty per cent of 80.00 is 16.00, leaving 64.00.
- Do two discounts add together?
- No. Twenty per cent then ten per cent is 28 per cent off in total, because the second is taken from the reduced price.
- How do I work out the discount percentage between two prices?
- Divide the difference by the original price. From 80.00 to 64.00 is 16 divided by 80, so 20 per cent.
- How do I add a discount back on?
- Divide by one minus the discount. A price cut by 20 per cent is restored by dividing by 0.8, not by adding 20 per cent.
- Should the discount go on before or after VAT?
- Before. Discount the net, then calculate the tax on what is left.