What Are Discounts in QuickBooks?

Discounts in QuickBooks are reductions in the total amount due on a sales transaction. These can be:

• Percentage-based discounts (e.g., 10% off)
• Fixed amount discounts (e.g., $25 off)
• Early payment discounts (e.g., 2% if paid within 10 days)

QuickBooks lets you customize discount rates in several ways depending on whether you’re using QuickBooks Online or QuickBooks Desktop.

QuickBooks Online (QBO)

Step 1: Enable the Discount Field

1. Log in to QuickBooks Online.
2. Click the ⚙️ Gear icon in the top-right corner.
3. Go to Account and Settings.
4. Select the Sales tab from the left menu.
5. Scroll to Sales form content and click ✎ Edit.
6. Check the box for Discount.
7. Click Save, then Done.

This enables the discount field on all sales forms (invoices, sales receipts, estimates).

Step 2: Apply a Discount on a Sales Form

1. Click + New > Invoice or Sales Receipt.
2. Fill in the customer, date, and other details.
3. Scroll down to the Subtotal area.
4. You’ll now see a Discount field:
   • Select Discount percent to enter a rate like “10%”.
   • Or select Discount value to enter a fixed amount like “$25”.
5. QuickBooks will automatically calculate the new total after discount.

You can toggle between % and $ using the dropdown next to the Discount field.

Step 3: Customize Discount Description on Sales Form

By default, QuickBooks labels the discount line as “Discount”. To change how this appears to customers:

1. Click the Customize button at the bottom of the invoice.
2. Choose Edit current or create a New Style.
3. Go to the Content tab and click on the Footer section.
4. Modify the label where the discount appears (this may be limited in QBO).
5. Save the template.

Step 4: Apply Item-Level Discounts (Workaround)

QBO applies discounts at the invoice level by default, not per line item. To apply different discount rates per item:

1. Create a Discount item:
   • Go to Gear > Products and Services.
   • Click New, then choose Service.
   • Name it “Discount – 10%” or similar.
   • Set Sales price as a negative percentage of a typical value or leave blank.
   • Choose an Income account like “Sales Discounts”.
   • Save and close.
2. Add the “Discount” item directly under the product/service you want to discount.
3. Manually calculate and enter the negative amount.

This is a manual method but works if you need precise control.

Step 5: Use Discount Terms for Early Payment

To offer automatic early-payment discounts (e.g., 2/10 Net 30):

1. Click Gear > All Lists > Terms.
2. Click New.
3. Choose:
   • Name: “2% 10 Net 30”
   • Discount percent: 2%
   • Discount if paid within: 10 days
   • Net due in: 30 days
4. Click Save.

Then, assign the term to customers. QuickBooks will track eligibility for the discount but won’t automatically reduce the invoice—you’ll need to apply it manually upon payment.

QuickBooks Desktop (QBD – Pro, Premier, Enterprise)

Step 1: Enable Discounts

In QuickBooks Desktop, discounts can be managed using discount items or terms.

Option 1: Create a Discount Item

1. Go to Lists > Item List.
2. At the bottom, click the Item button > New.
3. Choose Type: Discount.
4. Name the item (e.g., “10% Off”).
5. Set:
   • Amount or %: e.g., 10%
   • Account: “Sales Discounts” or create a new one
   • Tax Code: Choose taxable or non-taxable
6. Click OK.
   

Step 2: Add Discount Item to Sales Forms

1. Go to Customers > Create Invoices.
2. Fill in invoice details.
3. At the bottom or after a product line, add the Discount item.
   • It will apply the discount based on the total amount above it.
   • You can add multiple discount items if needed.

QBD allows line-by-line control using discount items as needed.

Step 3: Use Custom Discount Rates

If you want to apply different discount rates per customer or transaction:

1. Create multiple Discount items (e.g., “5% Off,” “15% Off”).
2. Use the relevant one during invoice creation.

This gives you flexibility while keeping accounting organized.

Step 4: Automate Early Payment Discounts with Terms

1. Go to Lists > Customer & Vendor Profile Lists > Terms List.
2. Click Terms > New.
3. Choose Standard or Discount type.
4. For discount terms:
   • Name: “2% 10 Net 30”
   • Discount percent: 2%
   • If paid within: 10 days
   • Net due in: 30 days
5. Click OK.

When applied to an invoice, this allows QuickBooks to calculate the discount at the time of payment, not when creating the invoice.

Step 5: Show Discounts on Printed Invoices

To display discount details clearly:

1. Go to Lists > Templates.
2. Select your invoice template > right-click > Edit Template.
3. Click Additional Customization.
4. Under Columns, make sure Item, Rate, and Amount are checked.
5. Under Footer, enable Discount.
6. Save changes.

You can rename labels or add custom fields to make the invoice clearer for customers.

Step 6: Track Discount Amounts in Reports

To see how much you’re giving in discounts:

1. Go to Reports > Company & Financial > Profit & Loss Standard.
2. Look for the “Sales Discounts” account.
3. Click on the amount to see a transaction report of all applied discounts.

You can filter by:

• Date range
• Customer
• Discount item

This helps analyze the impact of your discount strategy.

Tips

• Always use negative values when applying discounts as line items.
• Keep a separate income account for discounts to track them easily.
• In QBO, consider 3rd-party apps for advanced discount logic like tiered discounts or coupons.
• Be cautious with tax settings on discount items to ensure accurate reporting.
• For businesses that offer bulk discounts or seasonal promotions, creating multiple predefined discount items saves time.

Conclusion

Customizing discount rates in QuickBooks gives you greater control over your pricing strategy, encourages early payments, and improves customer satisfaction. While QuickBooks Online offers quick setup and ease of use, QuickBooks Desktop allows deeper customization through line items and templates.

With a little setup effort, you can streamline your discounting process, improve bookkeeping accuracy, and gain better insights into how discounts impact your bottom line.