Impact of a Discount Pricing Strategies
When competition gets tough it’s tempting to resort to discounting, but it can cause huge cash flow problems for a business and often pricing problems might be a symptom of other weaknesses.
Inevitably discounting is a short term solution with a long term impact which has the potential to devastate profits. However, it is important to consider discounting as a tool to manager your stock and in turn your working capital.
The table below outlines how much more you’ll need to increase your sales by in order to make the same amount of money, based on various Gross Profit Margins and discounts. Food for thought! Hopefully your accountant has used a similar model to explain the effects.
