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Early Payment Discount

A price reduction offered for settling an invoice ahead of terms.

Area
Accounting
Also known as
prompt payment discount, cash discount
In this area
51 terms of 257

An early payment discount — quoted as 2/10 net 30, meaning 2% off if paid within 10 days instead of 30 — rewards fast settlement. It is common where suppliers value cash certainty over margin.

The implied annual return is high, often above 35%, which usually beats what the cash earns elsewhere. Capturing it depends on invoices being approved fast enough to hit the window.

How it is calculated

Annualised benefit = (Discount % ÷ (100 − Discount %)) × (365 ÷ Days saved)

2/10 net 30 works out near 37% annualised.

Early Payment Discount is not just a definition here

Accounting runs on this vocabulary every day in AWRA OpsHub — 51 of our 257 glossary terms describe things the platform actually does.