Reduction on invoice if paid quickly?

Due to a number of slow payers, I think I'm going to try to entice them
into paying quicker by reducing the price if it is paid within a week.

Say an item is £100, I will invoice for £100, but make a note that if it
is paid within x days, then only £95 will be payable.

Any views on that?

How do I account for that?
Book it down as £100, or, book it down as the amount received if paid in
time to get the discount?

Ta
Alan.

 

Good plan, if only because the VAT will be on the £95, regardless of
what is actually paid. The book-keeping is an issue for others here to
advise on.

Someone I know had this sluggish-payment problem. He upped his rate
by 30%, then offered a 30% discount to anyone who paid on time! Worked
a treat, and they got a "more expensive" professional at the same
discounted rate

 

Good plan, if only because the VAT will be on the £95, regardless of
what is actually paid. The book-keeping is an issue for others here to
advise on.

Someone I know had this sluggish-payment problem. He upped his rate
by 30%, then offered a 30% discount to anyone who paid on time! Worked
a treat, and they got a "more expensive" professional at the same
discounted rate

 

http://www.hmrc.gov.uk/manuals/vcasmanual/vcas5100.htm

should help.

Notice 700 The VAT Guide says:

(b) Discounts for prompt payment

If…
you offer a discount on condition that the customer pays within a
specified time

Then…
the tax value is based on the discounted amount even if the customer
does not take up your offer.

But…
if your terms allow the customer to pay by instalments, the tax value is
based on the amount the customer actually pays.


I don't know when it changed but used to that VAT was payable on the
undiscounted amount even if the offer was accepted.