Payment Terms Calculator — 2/10 Net 30 Discount Math
See the saving and the effective APR of 2/10 Net 30, or any X/Y Net Z terms, to decide whether an early-payment discount is worth offering or taking.
Payment Terms Calculator (e.g. 2/10 Net 30)
Pay within 10 days
$9,800.00
Discount saved
$200.00
Effective APR of skipping
37.2%
The classic 2/10 Net 30 — 2% off if you pay within 10 days, otherwise the full amount at 30 — works out at an effective APR of about 37% for skipping the discount, since you are paying 2% to keep the money an extra 20 days. That is dearer than almost any borrowing, so take the discount if you can fund it. The same maths cuts both ways: offering 2/10 Net 30 costs you roughly 37% annualised to collect 20 days sooner.
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An early-payment discount is a loan at a rate nobody writes down
The notation first, since it is not obvious: 2/10 Net 30 means 2% off if you pay within 10 days, otherwise the full amount at 30. Two is the discount, ten is the window to claim it, thirty is the full credit period.
Now the reframing that makes the rest of the page work. If you skip the discount you are not declining a bonus — you are paying 2% for the right to hold the money 20 days longer. Annualise that and it comes to about 37%, which is dearer than almost any borrowing a small business can get. On a 10,000 invoice the discount is worth 200 and the early payment is 9,800.
The formula the calculator uses:
APR = (discount % / (100 - discount %)) x (365 / (net days - discount days)) x 100
Both sides of the same number
As the buyer, if you can fund the early payment, take it — you are declining a 37% return for the sake of twenty days of float. If you genuinely cannot, that is worth noticing rather than shrugging at: turning down money this cheap is usually a signal about working capital rather than a preference.
As the supplier, and this is the half most pages omit, offering the same terms costs you roughly 37% annualised to collect twenty days earlier. That can still be the right call. If the alternative is an overdraft, an invoice factoring arrangement, or missing payroll, then 37% may honestly be the cheapest money available to you that week. What it should not be is a clause inherited from a template nobody priced.
The window moves the rate more than the discount does
This is where the arithmetic is counter-intuitive and where most negotiation attention goes to the wrong lever. Compare, all on a 365-day basis:
1/10 Net 30— 18.4%2/10 Net 30— 37.2%3/10 Net 30— 56.4%2/10 Net 45— 21.3%2/15 Net 45— 24.8%1/15 Net 60— 8.2%
Holding the discount at 2% and stretching the net period from 30 to 45 days nearly halves the cost, from 37.2% to 21.3%, because the same 2% now buys 35 days instead of 20. Meanwhile nudging the discount from 2% to 3% over the same window drives it to 56.4%.
So the discount percentage is the lever everyone argues over and the gap between the two dates is the one that actually sets the rate. If terms you have been offered look expensive, asking for a longer net period is often an easier concession to win than a smaller discount, and it moves the number further.
Setting terms on purpose
If you offer a discount, price it against what short-term money actually costs you, not against what a competitor prints on their invoices. If you are offered one, annualise it and the decision usually answers itself — either the cash is there, in which case take it, or it is not, in which case you have learned something more important than the 200.
One note on the arithmetic: this uses a 365-day year. The older textbook convention uses 360 and gives slightly lower figures — 36.7% rather than 37.2% for 2/10 Net 30 — so a small discrepancy against another source is usually just that.
The discount is the carrot; the late fee calculator handles the stick, and the two belong in one policy rather than being decided separately.
How to use the Payment Terms Calculator (2/10 Net 30, Etc.)
Takes about a minute. No signup, no download, your data stays in your browser.
- 1Open the tool. Scroll up to the Payment Terms Calculator (2/10 Net 30, Etc.) above — it loads instantly in your browser, no install needed.
- 2Enter your values. The fields come pre-filled with realistic defaults so you can see how it works — replace them with your own numbers.
- 3Read the result. The output updates instantly. Copy or share it — nothing is uploaded to a server, everything stays on your device.
Frequently asked questions
Common questions about the Payment Terms Calculator (2/10 Net 30, Etc.).
What does 2/10 Net 30 mean?
Two per cent off if you pay within ten days, otherwise the full amount is due at thirty. The first number is the discount, the second is the window in which you can claim it, and the third is the full credit period. The same shape covers any X/Y Net Z terms you are offered.
Why is 2% equivalent to about 37% a year?
Because you are only buying twenty extra days with it — the gap between day 10 and day 30. Two per cent for twenty days repeated across a year compounds to roughly 37%, which is why an apparently small discount is one of the more expensive forms of credit a business routinely turns down.
Should I always take an early-payment discount?
If you can fund it, almost always: passing it up means declining about a 37% annualised return for twenty days of float, and very little borrowing costs that much. If you genuinely cannot fund it, the useful takeaway is not the 200 you missed but what it says about working capital.
Why would a supplier offer terms this expensive?
Because the comparison is not against zero, it is against their next-cheapest cash. Set beside an overdraft, invoice factoring, or the cost of missing payroll, paying about 37% annualised to be paid twenty days sooner can be entirely rational. The mistake is inheriting the clause from a template without ever pricing it.
Which matters more, the discount or the number of days?
The days, and by a wider margin than most people expect. Keeping the discount at 2% and moving from Net 30 to Net 45 takes the annualised cost from 37.2% down to 21.3%, because the same 2% now buys 35 days instead of 20. Raising the discount to 3% over the original window pushes it to 56.4%.
Why does my own calculation differ slightly?
Most likely the day count. This uses a 365-day year while the older textbook convention uses 360, which gives 36.7% rather than 37.2% for 2/10 Net 30. Both are defensible and the gap is small enough that it never changes the decision.
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