Early Payment Discount Calculator

Terms like 2/10 net 30 give customers 2% off for paying within 10 days instead of 30. The discount looks small but is expensive when annualized.

How to use the Early Payment Discount Calculator

  1. Enter the invoice amount and discount terms.
  2. Enter your cost of capital.
  3. Read the annualized cost and verdict.

How it works

Annualized rate = Discount% ÷ (100 − Discount%) × 365 ÷ (Net days − Discount days). Compare it with your cost of capital or borrowing rate.

Worked example

2/10 net 30 equals about 37.2% a year (2 ÷ 98 × 365 ÷ 20).

Good to know

For the seller it is a cost of faster cash; offer it only if cheaper than alternative financing.

For the buyer, taking the discount is usually an excellent return versus short-term borrowing.

Dynamic discounting can scale the discount by days paid early.

Frequently asked questions

2% discount if paid within 10 days, otherwise the full amount is due in 30 days.

Discount ÷ (100 − discount) × 365 ÷ (net days − discount days).

If the annualized cost is below your financing cost and customers will actually use it.

Results are estimates for information only and are not accounting, financial or legal advice.