BOP Program Statement 2011.13 § 6

If a discount is offered by a vendor, either on the purchase order or the invoice, a determination is

made whether or not taking the discount would benefit the Government.

a. Determining the Discount Date. In determining the discount date, three situations can

occur:

■ If the vendor dates the invoice, the discount period begins the day after the date the vendor

places on the invoice. The discount date is determined by taking the date the vendor places on

the proper invoice and adding the discount terms to it.

■ If the vendor fails to date the invoice, the discount period begins on the date the proper invoice

is received, if it is annotated or stamped with the date of receipt.

■ If the discount terms specify the actual discount due date, for example, 4% if paid by January

16, this date must be adhered to.

b. Discount Requirements. The following requirements must be me t before a discount can be

taken:

(1) Discounts may be taken only when economically beneficial to the Government, based on the

effective annual interest rate of the discount terms. The Current Value of Funds Rate (CVFR) is

used when deciding whether to take a discount. This rate is determined annually by Treasury and

published in the Federal Register. Discounts are taken when the discount terms in the following

conversion formula result in an effective annual interest rate equal to or greater than the CVFR.

Conversion Formula

Discount % 360 = Effective

100% minus x Number of Days - Number of Days Annual

Discount % in Payment Left in Discount Discount

Period Period* Rate

*The discount period is reduced by the number of days between the invoice date and the date of

receipt.

Example:

CVFR: 5%

Discount Terms: 2%/10 net 30

Invoice Date: March 2

Receipt Date: March 6 (4 days elapsed time)

.02 x 360 = .306 or 31%

1.00 - .02 30 - (10-4)

Based on this example, the effective annual discount rate exceeds the CVFR; payment is made

according to the discount terms.

(2) Discounts may be taken only after acceptance of goods or services has occurred. Under no

circumstances can an invoice be paid early to take a discount before the goods/services have been

accepted.

Example:

Invoice Date: August 1

Invoice Received: August 5

Goods Accepted: August 15

Discount Terms: 2%/10 net 30

The discount period ended August 11 (August 1 + 10). Since payment cannot be made sooner

than August 15, the date the goods are accepted, the discount is lost.

(3) In addition to acceptance of the goods, payment to obtain a discount cannot be made until a

proper invoice has been received.

Example 1:

Invoice Date: May 15

Invoice Received: May 21

Goods Accepted: May 13

P2011.13 5/29/2014 9

Discount Terms: 2%/10 net 30

The invoice must be paid by May 25 (May 15 plus 10 days) to realize the discount; however,

payment cannot be made sooner than May 21, the date the invoice was received.

Example 2:

Invoice Date: June 3

Invoice Received: June 15

Goods Accepted: June 6

Discount Terms: 2%/10 net 30

Since the discount period ended before the invoice was received (June 3 plus 10 days is June 13),

the discount is lost.

(4) If the contract does not state the discount terms, but the invoice does, the discount may be

taken based on the terms listed on the invoice. If the contract states the discount terms, but the

invoice does not, the discount may be taken based on the contract terms. If the contract and the

invoice state different terms, take the better of the two.

(5) If a discount is taken after the discount period and is not repaid before the payment due date,

an interest penalty is calculated on the amount of the discount taken. The period begins the day

after the specified discount date through the date of payment of the discount erroneously taken.