How invoice discounts are calculated
A line-level discount reduces a single item's amount before tax; an invoice-level discount reduces the whole subtotal and is spread proportionally across the lines. Both must be applied before tax is calculated. Show the discount as its own line on the invoice so the customer can see what they were given.
Line-level vs invoice-level
A line-level discount belongs to one item — a bulk price on one product, a goodwill reduction on one service. An invoice-level discount applies to the whole bill, such as a 10% loyalty discount across everything.
The distinction matters once tax is involved. An invoice-level discount has to be allocated back across the lines in proportion to their value, because different lines may carry different tax rates. Applying it as a lump sum after tax would produce a tax figure that does not match any line.
| Line A | Line B | Total | |
|---|---|---|---|
| Amount | 100.00 | 300.00 | 400.00 |
| Share of 10% invoice discount | 10.00 | 30.00 | 40.00 |
| Taxable value | 90.00 | 270.00 | 360.00 |
Percentage vs fixed
A percentage discount scales with the amount; a fixed discount does not. Use fixed for a negotiated round-number reduction, and percentage for anything volume- or relationship-based. A fixed discount should never exceed the line or subtotal it applies to — a well-behaved invoice tool clamps it rather than producing a negative charge.
Show the discount, do not bury it
Reducing the unit price silently hides the concession you made. Showing the full price and a separate discount line makes the value visible, which matters both commercially and when the customer compares the invoice against the quote.