Discount period

The term discount period may refer to the period of time that has elapsed since a bill of exchange is issued until just before the payment due date.

A bill of exchange is a kind of document which states that an entity is obliged to pay a certain amount of money. This includes the date on which the payment should be made. A bill of exchange therefore functions as a negotiable instrument, because it serves as a contract which requires a payment to be made. In order for such a document to be valid, however, the signature of the debtor is required. This qualifies the bill as legal and signifies the knowledge of the debtor of his obligation. One example of a bill of exchange is the check. This contains all the pertinent information of the transaction, including the entity to whom the debt is owed, the amount of money to be paid, the date on which the payment is to be made, as well as the agreement of the payor to make such a payment as signified by his signature.

On the other hand, the term discount period may also sometimes be used to refer to a period of time which is set by a business, during which the products or services it sells may be purchased at a lower price, or at a discount. Sometimes, such periods are set in order to encourage consumer spending, which may be caused by a dip in the economy. Certain industries may set such periods during very specific times in a year, depending on consumer demand and behavior during these seasons.

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