Unearned Discount

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Unearned Discount

A finance charge a lender assesses at the beginning of a loan, but only recognizes as income gradually over the loan's life. In accounting, the unearned discount is listed at first as a liability on the lender's balance sheet, but is slowly recognized as income.
References in periodicals archive ?
I learned that un-repaid, unearned discounts could offset credits that would otherwise be turned over to the state under escheatment laws."
Moreover, the dissent refused to accept the promissory note as a mere collection mechanism for unearned discounts. It found that a liquidated damages clause in the supply agreement provided a remedy for its own breach, which demonstrated that the repayment obligation under the promissory note remained independent of (albeit linked to) the supply agreement.
Fragmented across disparate systems, applications and organizational boundaries, the quote-to-cash cycle and associated processes are now fertile ground for profit loss in the form of late pays, chargebacks, write-offs, penalties and unearned discounts.
An automated business-rule capability with algorithm-based problem detection and exception-based reporting can monitor and highlight those exceptions likely to result in late pays, chargebacks or unearned discounts.
* The quote-to-cash cycle and associated processes are ripe for profit loss in the form of late pays, charge-backs, write-offs, penalties and unearned discounts.
Let's begin with the principle, that what we might call indirect or unintentional promotional funding (slotting allowances, abuse of unsaleables policies, unearned discounts, deductions and all the other dark demons of the 1980s and 1990s), which ought not to be the basis of profitability.
Do unearned discounts age out in the reporting of DSO?
If left unchecked, your company could be losing millions of dollars a year with these unearned discounts.
* Coding, tracking and rolling up deductions or unearned discounts is impossible.
Good communication is truly important between Cash Applications and the Credit Department--the process of researching and addressing deductions, short-pays, unearned discounts, and other pay habits starts with the Cash Application area.
Most manufacturers and distributors struggle with the same types of short payment problems; pricing disputes, unearned discounts, shipping discrepancies, returned goods, advertising allowances, sales promotions and so forth.