A routine reduction (discount) from the regular price (list price/ catalogue price) of a product or service that is extended a seller to a buyer at the time of purchase of respective goods/ services. Reductions may be extended by manufacturers to wholesalers or retailers for purchases of their products, whether for amount considerations (bulk amount) or otherwise. A functional discount is a monetary relief of part of the price, usually for a reseller rather than the end customer.

A functional discount may correspond to a situation in which a price reduction is extended by a seller if, and only if, a buyer pays for the items purchased within a specified period of time. Examples of a situation where a functional discount is used include purchases of goods or services from a supplier, the acquisition of  securities/ assets/ investments via a broker or a dealer, or retail sales that are transacted between a retailer and an end consumer.

Commonly, if a buyer fails to make payment within the defined window of time (window of discount), the discount is considered null and void, and the amount due will be re-adjusted to reflect the original list price of the products.

It is also known as a trade discount or a trading discount.