Discount rate

The concept

The discount rate is the percentage deducted from the value of a receivable when it is exchanged for available money before the date it would originally have been paid. It is the cost of a receivables advance: the higher the discount rate, the less is left of the advanced amount.

How it shows up in practice

You billed 50 thousand in sales this month, but payout only leaves in 15 days and your traffic costs are due tomorrow. You evaluate advancing the receivable and see a 3% rate. You pay 1,500 to have the money today.

Discount rate is literally how much having money before the deadline costs. The greater the percentage, the less remains for real. The decision is quick: advance if the value of the cost is less than the cost of not having the money now, like not paying the traffic bill and losing the campaign.