Early Payment Discount Calculator

Decide whether taking 2/10 net 30 beats holding on to the cash.

A 2% discount for paying twenty days early sounds small. Annualised, it is a return of roughly 37% — far above almost any cost of borrowing. Early-payment discounts are routinely declined by businesses carrying overdrafts at a fraction of that rate, purely because nobody converts the offer into a comparable number.

Annualised return

—

Cash discount —

Amount payable if early —

Days paid earlier —

Effective annual rate earned by paying early. Compare it to your cost of capital.

Your numbers

Invoice amount

value

Discount offered

Pay within

days

Full payment due

days

The formula

Annualised return = [Discount% ÷ (100 − Discount%)] × [365 ÷ (Net days − Discount days)]

If this beats your cost of borrowing, paying early is the cheaper option.

What it means

Accounts Payable — full definition

Read in the glossary

How to use it

1
Read the terms literally: "2/10 net 30" means 2% off if paid within 10 days, otherwise the full amount at 30.
2
The financing window is the difference between the two dates — 20 days here, not 30.
3
Compare the annualised return to your actual cost of capital: overdraft rate, facility rate, or the return the cash would otherwise earn.

Where it goes wrong

Taking a discount you cannot afford is a false economy if it pushes you into unplanned borrowing at a higher rate, or leaves you short for payroll.
Discounts only pay if you genuinely pay within the window. Claiming the discount and paying late damages the relationship and often gets clawed back.

Worked example

Turning down 37%

On a 250,000 invoice at 2/10 net 30, the discount is worth 5,000 and you pay 245,000 twenty days early. The annualised return is 37.2%. Financing that early payment on a 16% overdraft still leaves you well ahead — declining the discount to preserve cash costs more than borrowing to take it.

Common questions

How do I read terms like 1/15 net 45?

1% off if you pay within 15 days, full amount due at 45. The financing window is 30 days, giving an annualised return of about 12.3%.

Should I always take the discount?

Take it whenever the annualised return exceeds your cost of capital and the cash is genuinely available. Below that threshold, holding the cash is the better trade.

Can I negotiate early-payment terms?

Often, yes — especially with suppliers whose own cash cycle is tight. It can be an easier win than a headline price reduction, and it improves their DSO as much as it improves your cost.

Let AWRA do this on your live data

This calculator works on one set of numbers. AWRA OpsHub keeps early payment discount calculator results current across every item, supplier and location — automatically.

Book a demo See pricing

More free tools

All 18 calculators