Invoice Luxe6 Discount Calculation Mistakes That Cost You Money
Are you making these discount mistakes? Stacked percentages, discounting the wrong price, VAT order and reverse discounts explained with examples and the correct method.
Discounts look simple, but small errors can cost a business money or confuse customers. Here are six mistakes to check for, with the correct method for each.
Correct discount formula: sale price = original price × (1 − discount ÷ 100)
1. Adding stacked discounts together
20% off followed by another 10% off is not 30% off. The second discount applies to the already reduced price.
100 × 0.80 = 80, then 80 × 0.90 = 72. The total discount is 28%. See stacked discounts.
Want to try it right away? Discount Calculator is free and needs no signup.
2. Working backwards the wrong way
A jacket costs 80 after a 20% discount. The original price is not 80 + 20% = 96. It is 80 ÷ 0.80 = 100. Read find the original price before a discount.
3. Discounting the price with VAT already included
Normally the discount applies to the net price, and VAT is added to the reduced amount. On 200 net with 10% off and 20% VAT: 180 net, 36 VAT, 216 total. See discount and sales tax together.
4. Confusing discount with markup
Reducing a price by 20% and increasing it by 20% are not opposites. A price of 100 raised 20% is 120, and 120 reduced by 20% is 96. See markup vs discount.
5. Forgetting the effect on profit
A 10% discount can remove far more than 10% of your profit. If your margin is 30, a discount of 10 on a price of 100 cuts profit from 30 to 20, which is one third of your profit.
| Price | Cost | Profit | Profit after 10% discount |
|---|---|---|---|
| 100 | 70 | 30 | 20 |
6. Rounding too early
Rounding each step can leave you a cent or two off, which adds up on large orders. Calculate with full precision and round the final amount.
Quick reference
| Discount | Multiplier | 100 becomes |
|---|---|---|
| 5% | × 0.95 | 95 |
| 10% | × 0.90 | 90 |
| 20% | × 0.80 | 80 |
| 25% | × 0.75 | 75 |
| 50% | × 0.50 | 50 |
Check your discounts
A discount calculator shows the sale price and the amount saved at once, so you can verify a price before you publish it.
FAQ
How do I calculate 20% off a price?
Multiply the price by 0.80. For 80, that gives 64.
Do two 10% discounts equal 20%?
No. They equal 19%: 100 × 0.90 × 0.90 = 81.
Is the discount applied before or after tax?
Usually before. The tax is then calculated on the reduced price. Check the rules that apply to you.
How do I find the discount percentage from two prices?
(Original − sale) ÷ original × 100. For 100 and 75, that is 25%.