Should you pay the invoice early? Enter the amount and terms such as 2/10 net 30 to get the discount, the amount to pay by the discount date and the annual interest rate you effectively pay by skipping it.
Last updated:
Invoice and terms (e.g. 2/10 net 30)
$
%
The first number in 2/10 net 30.
days
Pay within this many days to get the discount.
days
Full amount due after this many days.
% / yr
Your borrowing rate or return on cash, for a take-it-or-not recommendation.
Enter your values to see the result.
Advertisement
Advertisement
How to use the Early Payment Discount Calculator
Enter the invoice amount and, optionally, the invoice date for the deadlines.
Enter the terms: discount %, discount days and net days, or tap a preset like 2/10 net 30.
Add your cost of money, such as your credit line rate, to get a recommendation.
Read the result: how much to pay early and what skipping the discount costs per year.
Compare common terms in the table and chart.
Early payment discount formulas
Discount = invoice × discount %. Amount if paid early = invoice − discount.
Simple annual cost of skipping = d ÷ (100 − d) × 365 ÷ (net days − discount days).
Example, 2/10 net 30 on $10,000: discount $200, pay $9,800 by day 10. Skipping costs 2 ÷ 98 × 365 ÷ 20 = 37.24% a year simple, or 44.59% effective.
Annual cost of common payment terms
Terms
Simple annual rate
Effective annual rate
1/10 net 30
18.43%
20.13%
2/10 net 30
37.24%
44.59%
2/10 net 45
21.28%
23.45%
2/10 net 60
14.90%
15.89%
3/10 net 30
56.44%
74.35%
1/15 net 45
12.29%
13.01%
2/15 net 45
24.83%
27.86%
0.5/10 net 30
9.17%
9.58%
Rates use a 365-day year. Some textbooks use 360 days, which gives slightly lower figures. The longer the gap between the discount date and the net date, the cheaper it is to skip the discount.
Frequently asked questions
What does 2/10 net 30 mean?
It means you can take a 2% discount if you pay within 10 days of the invoice date; otherwise the full amount is due within 30 days. On a $10,000 invoice, paying by day 10 costs $9,800.
What is the cost of not taking a 2/10 net 30 discount?
Skipping the discount means paying $2 extra for every $98 to keep the money 20 more days. As a simple annual rate that is 2 ÷ 98 × 365 ÷ 20 = 37.24%; compounded, it is about 44.59% a year.
Should I borrow to take an early payment discount?
If the annual cost of skipping the discount is higher than your borrowing rate, taking the discount with borrowed money is cheaper. With 2/10 net 30 costing over 37% a year, a credit line at 8% to 12% usually wins.
Why divide by 98 and not 100?
Because by paying early you are effectively borrowing the discounted amount ($98), not the full $100, and the $2 is the interest on that $98.
Should sellers offer early payment discounts?
A discount speeds up cash flow but is expensive: 2/10 net 30 costs the seller the same high annual rate. It can still make sense when cash is tight or late payments are common.
Are all the tools on FreeToolCabin tested for quality and accuracy?
Yes! Every tool on our site undergoes automated Q/A testing in real browser environments to ensure high precision, correct output, and zero errors. If you happen to spot a bug or have a suggestion, please contact us at [email protected] and our team will review it right away.