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Gary Bode, CPA is a Master's Degreed, nation wide accountant offering tax and business services. Member of AICPA and NCACPA. Our virtual office provides excellent service to long distance and international clients. Call (910) 399-2705 for a free phone consult.

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I used Gary’s services to file my 2012 income tax return. This was my first year having an accountant do my return, as I have always done it myself using TurboTax. However, this year I had cancelled debt from my old primary residence which I was forced to convert to a rental property after relocating out of state.

While it didn’t cost me anything to do the short sale, the income tax consequence from the cancelled debt, roughly $50,000 in my case, was enough to move me from the 15% tax bracket to the 25% tax bracket.  Needless to say, I was concerned about that.

Finances were already tight and my husband and I are expecting our first child this fall. So the possibility of owing income tax was stressing me out. However, Gary was great at relieving my fears.

He is extremely knowledgeable, answered all my questions and was very thorough. I knew I was in good hands. He kept in constant contact with me throughout the process, keeping me updated on the progress of my return and letting me know what paperwork he needed to complete my filing.

In my mind, best case scenario would have been to not owe any taxes. Second best would be to only owe a little. Well, you can imagine my surprise and delight when Gary told me I was actually due a refund of a little over $2,700.00!

To top it all off, I found Gary’s fee for service to be fair, competitive and affordable; especially given the complexity of this type of return. I am so glad I did not try and go it alone this year. I am extremely pleased with Gary’s service and would recommend him highly to anyone, in fact I already have. If you have cancelled debt from a short sale or foreclosure, don’t freak out. Take a deep breath and call or email Gary. I am grateful I did.

Angie Falke of Holiday, FL

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Even though Gary enjoys helping colleagues, we no longer provide free consults to other tax preparers. He's happy to consult on an hourly billing basis if our schedule allows.

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QuickBooks CPA Explains Vendor Discounts including an example

CPA Wilmington NC discusses vendor discounts

An CPA example of a 2/10 vendor discount using Wilmington NC Widgets.

QuickBooks CPAs recognize good bookkeeping helps with cash flow. Good cash flow has many rewards like Vendor Discounts.

“2/10 net 30” means take off 2% if you pay within 10 days, or, remit the full amount in 30 days. Let’s take a look at the cash flow implications of this vendor discount from the perspective of  QuickBooks CPA, our example company. Most vendor also impose financing charges if you pay after the 30 days.

Carrot and Stick: Vendor Discounts and Finance Charges

This vendor discount is truly one of the rewards of good cash management. It amounts to about a 36% APR savings for QuickBooks CPA, on its average annual vendor balance. Really, a very nice carrot.  For a dramatic example, let’s say QuickBooks CPA has an invoice for $100,000. QB CPA could wait for 30 days and then pay the full $100K. And might have to if QuickBooks CPA has cash flow problems. Waiting longer than 30 days usually incurs financing charges by the way. But paying within the 10 days means only remitting $98,000, saving $2,000.

An Example of a Vendor Discount APR Calculation

So, QuickBooks CPA takes advantage of the vendor discount and saves $2,000 by paying the $98K due 20 days early. For convenience in calculations, let’s call it $100K, for 20 days, and say there are only 360 days in a year. 360/20 = 18. 18 x $2000 = $36,000.  36K/100K = 36%. Roughly. Combine this discount with paying by credit card, and you could have up to 40 days, not just 10, to pay 98% of the invoice. So taking that 2/10 vendor discount is a great deal. Having the cash flow to take advantage of it is good management.

More About Carrots and CPAs

There are few investment opportunities in America that guarantee a return of 36%, even with risk.

  • The 10 day limit takes discipline and good bookkeeping procedures to meet it.
  • First, the timer usually starts from the date of the invoice, so you lose a few days if the vendor mails it. Ask your vendor for e-mail invoices, or, just anticpate the bill in QuickBooks using a purchase order.
  • Next is QuickBooks CPA’s turn around time, which includes due diligence in validating the order, cutting the check etc.

So taking the discount isn’t always easy.

Why would the vendor give up the 2%? 

QuickBooks CPA has to be meet  the vendor’s criteria for offering a 2/10 discount, like reliability, quality, response time etc.

  • Their CPA may not like running a large accounts receivable.
  • Collecting most of your money now is better than spending money to collect on the invoice later.
  • Maybe they have cash flow problems.
  • Perhaps this is a customer loyalty incentive extended to QuickBooks CPA.
  • Maybe it’s reward for being a high volume customer.

Even More About Sticks

Unfortunately, as a CPA, I sometimes see clients not taking advantage of the 2/10 vendor discount, AND, paying 18% APR finance charges for paying later than 30 days. The double whammy. Decreasing the bottom line from two directions. So, these vendor cash discounts, when offered, represent real savings.

We’re a QuickBooks CPA firm with a virtual office to serve companies regardless of where they’re located. For a free initial consult please call  (910) 399-2705.

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4 comments to QuickBooks CPA Explains Vendor Discounts including an example

  • Davis Markton

    For years I thought paying vendors as late as possible was the best strategy even tho we keep good cash surpluses. But this makes sense and I’ll run it by my CFO. Great article, thanks.

  • C.H.H.

    I’ve been so bogged down trying to grasp the concept of vendor fees for my new small business here in Wilmington! Opening up your own small business is hard enough in this economy. Your simple example really helped me apply it to my own situation. Thanks so much!

  • Constance T.

    LOL. Boy, have I been doing it wrong in my business! Thanks for the info on vendor discounts. I will be changing my modus operandi this week.

  • Sweet site, super design , real clean and use friendly .

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