2/10 net 30 early payment discount calculator
Enter discount terms and cost of capital to see the cost a year and whether it pays.
Cost a year
Offering 2/10 net 30 costs 37.24% a year, more than the cost of capital of 8%, and loses €49,929 a year at these numbers.
Cost a year by discount
The dashed line is cost of capital, and discounts above it cost more.
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See the formula
Days between terms = Net days − Discount days Cost a year = Discount ÷ (1 − Discount) × 365 ÷ Days between terms Compounded cost = (1 + Discount ÷ (1 − Discount)) ^ (365 ÷ Days between terms) − 1 Cash in earlier = Credit sales a year × Share taking discount × (1 − Discount) × (Days to pay now − Discount days) ÷ 365 Net gain or loss = Cash in earlier × Cost of capital − Credit sales a year × Share taking discount × Discount Break-even discount = k ÷ (1 + k), k = Cost of capital × (Days to pay now − Discount days) ÷ 365
Uses a 365-day year. It excludes bad debt saved and customers who take the discount but pay late.
Early payment discount cost
An early payment discount reduces an invoice when the customer pays within the discount days. The calculator works out the discount's cost as a rate a year from the discount, discount days and net days.
Compare that annual cost with your cost of capital. Add your credit sales and the share of customers who would take the discount to see the cash in earlier and the net gain or loss.
Common questions
How does a 2/10 net 30 calculator work?
It works out the discount's cost as a rate a year from the discount, discount days and net days. It compares that cost with your cost of capital and calculates the net gain or loss using your figures.
What is the annualized cost of an early payment discount?
It expresses the discount as a rate a year, based on the discount and the days between the discount date and the invoice due date. The calculator also shows the compounded cost.
Should we offer an early payment discount to customers?
Compare the cost a year with your cost of capital, then check the net gain or loss using your credit sales and the share of customers who would take the discount. The result reflects the numbers entered.
Is it worth taking 2/10 net 30?
The calculator shows the discount's cost as a rate a year. It compares that rate with the cost of capital entered, but does not decide whether a customer should take it.
How do you calculate the cost of an early payment discount?
The usual formula divides the discount fraction by one minus that fraction, then multiplies by 365 and divides by the days between the discount date and due date. The calculator also shows a compounded annual cost.