Why is it important to analyze the amount of the commercial discounts accorded or obtained ?

To properly manage your business's cash flow, you must first analyze the components that affect the timing of your cash inflows and cash outflows. A good analysis of these components will point out problem areas that lead to cash flow gaps for your business. Narrowing, or even closing, cash flow gaps is the key to cash flow management.

Discounts accorded or obtained are to improve the cash flow by increasing the sales and buying materials at reduced price. It is very much important to analyse the discounts, so that its actual purpose of improving cash flow is achieved or not shall be established.

agree with Sathish Prabhu.V 

Discounts accorded or obtained are to improve the cash flow by increasing the sales and buying materials at reduced price. It is very much important to analyse the discounts, so that its actual purpose of improving cash flow is achieved or not shall be established.

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• They are an important element of profitability (know to buy cheaper or know sell better),
• It may be more advantageous for the company to settle quickly the suppliers and get discounts or rebates which largely cover the cost of bank loans thereunder, or, conversely, to grant discounts to customers so that they have more intense trade relations with the company.