Early Payment Discount Calculator (2/10 Net 30)
The real annual interest rate you pay by not taking a prompt-payment discount such as 2/10 net 30, plus what the discount saves on an invoice.
Results
Effective annual cost of skipping the discount
44.59
%
Simple annual cost (not compounded)
37.24
%
Cost of skipping it, for the extra days
2.041
%
Saved by paying early
200.00
Amount to pay if you take the discount
9800.00
The dashed line marks the value you entered.
What this tool does
Terms of 2/10 net 30 mean 2 % off if you pay within 10 days, otherwise the full amount in 30. Skipping the discount means paying 2 ÷ 98, about 2.04 %, for the use of the money for 20 extra days, and that is equivalent to borrowing at roughly 37 % a year simple, or about 45 % a year once compounded. Few loans cost that much, so unless cash is truly short, taking the discount is usually the cheaper way to finance the invoice.
Formula
cost of skipping a d/D net N discount = (1 + d ÷ (1 − d))^(365 ÷ (N − D)) − 1 · simple: d ÷ (1 − d) × 365 ÷ (N − D)
Variables
| Symbol | Meaning | Unit |
|---|---|---|
d | Early-payment discount | % |
dd | Days within which the discount applies | — |
nn | Days until the full amount is due (net) | — |
iv | Invoice amount | — |
EAR | Effective annual cost of skipping the discount | % |
NOM | Simple annual cost (not compounded) | % |
PER | Cost of skipping it, for the extra days | % |
SAV | Saved by paying early | — |
PAY | Amount to pay if you take the discount | — |
Worked example
- Early-payment discount2 %
- Days within which the discount applies10
- Days until the full amount is due (net)30
- Invoice amount10,000
- Effective annual cost of skipping the discount44.59 %
- Simple annual cost (not compounded)37.24 %
- Cost of skipping it, for the extra days2.041 %
- Saved by paying early200.00
- Amount to pay if you take the discount9800.00
Limitations
- This is an informational calculator, not personalised financial advice. Rates, fees, taxes and contract conditions vary between institutions and countries.
- The tool works with whatever currency you use for the inputs; it does not convert between currencies.