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Supplier terms like 2/10 net 30 mean you can take a small discount if you pay within ten days, or pay the full invoice by day thirty. This calculator turns those terms into an annualized cost of skipping the discount — a way to compare paying early against a line of credit or working capital.
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Worked example (2/10 net 30)
Example only — not your vendor's terms. On a $10,000 invoice with 2/10 net 30, the 2% discount is $200 if you pay within ten days ($9,800 by day ten). If you pay on day thirty instead, you keep that $9,800 for twenty more days (from day ten to day thirty), and the cost of doing so is the $200 discount you give up. The annualized cost is 2 ÷ 98 × 365 ÷ 20, or about 37.2% per year.
FAQ
- What does 2/10 net 30 mean?
- The supplier offers a 2% discount if you pay within ten days. If you do not take the discount, the full invoice is due by day thirty from the invoice date. The numbers are examples — your vendor may use different days or percentages.
- How is the annualized cost of skipping the discount calculated?
- The calculator uses the standard trade-credit formula: discount percent divided by (100 minus discount percent), times 365, divided by the number of days between the discount deadline and the net due date. That turns a one-time discount into an annualized rate on the balance you keep until net day.
- When can borrowing to take a supplier discount make sense?
- Some owners compare the annualized cost of skipping the discount to the annual cost of cash they already have access to — such as a line of credit quote they hold. If the line costs less than the implied cost of waiting, paying early can reduce total outflow. The math depends on your quote, fees, and how long you would carry the draw.
- When might borrowing to take the discount not make sense?
- If your financing costs more than the annualized cost of skipping the discount, or if taking a draw tightens covenants and reporting you are not ready for, paying on net terms may be simpler.
- What if I pay after the net due date?
- This calculator models only the discount window and the net due date in your terms. Late fees, interest on overdue invoices, or loss of credit from the supplier are not included — check your invoice and vendor agreement for those charges.