Trade discount & landed cost calculator
Supplier list price in, real cost per unit out: trade and promotional discounts, settlement discount, carriage spread across the order, and the rebate kept where it belongs.
From list price to landed cost
- Discounts multiply, they do not add: list × (1 − trade) × (1 − extra) × (1 − settlement). Each one comes off what is left, not off the list price.
- Settlement discount is only taken off if the box is ticked. Untick it to see what the goods cost when you miss the terms.
- Carriage is divided equally across the packs on the order and added to each. Put the whole order's carriage and the whole order's pack count, not just this line.
- The rebate is shown as a separate figure and the price link uses the cost before rebate: a rebate is retrospective and conditional, so it should not be baked into a shelf price.
- Everything is ex VAT. The quick shelf price adds VAT at the end, the same way the trade-to-retail price calculator does.
Why 40% then 5% is 43%, not 45%
Suppliers stack discounts: a trade discount for being a merchant, a promotional or quantity discount on top, a settlement discount for paying early. Each one is taken off the price after the previous discount, so they multiply. 40% off leaves 60% of the list price; a further 5% off leaves 95% of that 60%, which is 57%, so the total discount is 43%. The gap looks small on one line and is not small on an order: on £10,000 of list price it is £200 you thought you had and do not.
| Discount chain | Adds up to | Actually is | You pay, per £100 list |
|---|---|---|---|
| 30% + 5% | 35% | 33.5% | £66.50 |
| 40% + 5% | 45% | 43% | £57.00 |
| 40% + 10% | 50% | 46% | £54.00 |
| 50% + 10% | 60% | 55% | £45.00 |
| 50% + 10% + 5% | 65% | 57.25% | £42.75 |
| 60% + 10% | 70% | 64% | £36.00 |
Effective discount = 1 − (1 − a)(1 − b)(1 − c). The order the discounts are applied in makes no difference to the result.
Settlement discount: is paying early worth it?
A settlement discount is the supplier paying you to shorten their cash cycle. The question is whether the money is better in your account for another 30 days or taken off the invoice now, and the way to answer it is to turn the discount into an annual rate: discount ÷ (1 − discount) × 365 ÷ days early. A 2.5% discount for paying 30 days before the normal due date is 0.025 ÷ 0.975 × 365 ÷ 30, which is about 31% a year. No overdraft costs that, so it is worth borrowing to take it. At 1% for paying 60 days early it is about 6%, which is a closer call.
- Only if you actually pay in time. Set the invoice to the net figure and miss the date, and you pay the difference back, usually with a phone call attached.
- VAT follows the discount. Since 2015, UK invoices that offer a settlement discount charge VAT on the full price and show the discounted VAT; you account for the lower VAT only if you take the discount. Your bookkeeping needs to match which one you did.
- Price on the net figure, book on the invoice. If you reliably take the discount, the net price is your real cost and the one to set margin on. If you sometimes miss it, price on the gross figure and treat the discount as a bonus.
Landed cost: carriage, pack sizes and rebates
The invoice price is not the cost. The cost is what it took to get the goods onto your shelf, divided by what you can sell.
- Carriage per pack. £15 delivery on an order of ten boxes is £1.50 a box, which on a £27 box is 5.5% of the price: more than the promotional discount you negotiated. Spread the whole order's carriage across the whole order, and watch for lines that only ever come in small orders, because they carry a bigger share.
- Minimum orders and carriage-paid thresholds. If the supplier delivers free over £500, a £480 order is costing you the carriage on everything in it. The calculator makes it easy to see when topping up the order is cheaper than paying delivery.
- Pack to each. Fixings, fittings and cable come in by the box and go out loose. A box of 200 screws at a landed £27.64 is 13.8p a screw, and 13.8p is the cost that belongs on the product you actually sell. Rounding that to 14p on the record overstates cost by 1.5% across the whole line.
- Rebates. A year-end rebate is a percentage back from the supplier for hitting a volume. It is real money, but it arrives months later, it depends on the whole year's buying, and it is often paid as credit against future purchases. Leave it out of the product cost and count it when it arrives.
- Imports. Duty and import VAT, customs agent fees and currency movement all belong in landed cost. For most UK merchants buying from UK distributors this is somebody else's problem, already inside the list price.
Worked example
Screws, list price £48.00 a box of 200, bought ten boxes at a time. Trade discount 40%: £28.80. Promotional 5% on top: £27.36. Settlement 2.5% for paying within 14 days, which you do: £26.68, 44.4% off list in total. Carriage £15 on the order, £1.50 a box, so the landed price is £28.18. The 2% year-end rebate would be 53p a box, taking it to £27.64 once paid, but the product record carries £28.18. Per screw that is 14.1p, which at a 40% margin is 23.5p ex VAT and 28p on the shelf.
The calculator opens with these numbers. Change any of them and the breakdown table updates.
What to put on the product record as cost
The net invoice price after any discount you reliably take, plus carriage, ex VAT, per unit you sell. Not the list price, not the price after a rebate that has not been paid. That cost is what the margin on the shelf price is measured against, what the stock valuation at year end uses, and what tells you whether a supplier's new price list is a 3% rise or a 7% one. The usual failure is a cost that was typed in once from a list price in 2022 and never touched again; the fix is to book stock in at the invoiced price every time, which is what a stock system is for.
Book stock in at the price you actually paid.
TradeSorter reads a supplier invoice into a purchase order, line by line with the invoiced price, so the cost on every product record is the real one. 30-day free trial, no card.
Common questions
Multiply the list price by one minus the discount. A £48 list price at 40% trade discount is 48 × 0.60 = £28.80. If a second discount applies, multiply again rather than adding the percentages: a further 5% is 28.80 × 0.95 = £27.36, which is 43% off list, not 45%.
A further percentage the supplier takes off the invoice if you pay within a short period, typically 2% to 2.5% for payment within 7 to 14 days instead of the usual 30 or 60. It comes off the invoice total, after trade discount, and only if you actually pay in time. VAT in the UK is charged on the discounted amount only when the discount is taken; the invoice should show both figures.
Usually, yes. Annualise it: discount ÷ (1 − discount) × 365 ÷ days early. A 2.5% discount for paying 30 days early is worth about 31% a year, far more than an overdraft costs, so it is worth borrowing to take it. It stops being worth it only when the days early are many and the discount small, or when paying early would leave you unable to pay something more expensive.
The net invoice price plus everything it cost to get the goods onto your shelf: carriage, any handling or pallet charge, duty on imports. Spread the carriage across the packs on the order and divide by units per pack to get a landed cost per unit. That is the cost to compare prices against and to set a margin on.
No, if you are VAT registered. You reclaim the VAT on purchases, so it is not a cost. Work every figure here ex VAT, then add VAT to the selling price at the end. If you are not VAT registered, the VAT you pay is a real cost and belongs in the landed cost.
Not on the product record. A rebate is retrospective and usually conditional on hitting a volume, so until it is paid it is not money you have. Keep the product cost at the net invoice price plus carriage, and treat the rebate as income when it arrives. The calculator shows the rebate separately for exactly that reason.