Early Payment Discount Calculator
Calculates savings from early payment terms like 2/10 Net 30 on an invoice amount
The full invoice amount before any discount
Percentage discount offered for early payment
Number of days within which payment earns the discount
Standard payment terms in days (e.g. Net 30)
Amount due if paid within the discount period
How much you save by paying early
Effective annual return of taking the early payment discount
Frequently Asked Questions
What does 2/10 Net 30 mean?
It means the buyer gets a 2% discount if they pay within 10 days. Otherwise the full amount is due in 30 days. This is a common payment term that incentivizes fast payment and improves the seller's cash flow.
Is it worth taking an early payment discount?
Almost always yes. A 2/10 Net 30 discount has an annualized return of about 36%. That means paying early is equivalent to earning 36% on your money, which far exceeds most investment returns or borrowing costs.
How do I calculate the annualized rate of an early payment discount?
Formula: (Discount % / (100 - Discount %)) x (365 / (Net Days - Discount Days)) x 100. For 2/10 Net 30: (2/98) x (365/20) x 100 = 37.2% annualized. This helps compare the discount against your cost of capital.
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