Free tools / Early payment discount
What does “2/10 net 30” really cost?
Two percent sounds small. It is two percent for twenty days, which is more than thirty-seven percent a year. Put your own terms in and see the rate, from whichever side of the invoice you are on.
No sign-up. Nothing you type leaves your browser.
Reading the terms
“2/10 net 30” means: take 2% off if you pay within 10 days; otherwise pay the full amount within 30. The choice is between paying 98 on day 10 and paying 100 on day 30. Waiting costs you 2 to keep 98 for 20 more days.
For 2/10 net 30 that is 2 ÷ 98 × 365 ÷ 20 = 37.2% a year. Compounded, because you could do it again every twenty days, it is higher still.
If a supplier offers it
Compare that rate with what money costs you. If you can borrow at 9% and the discount is worth 37%, take the discount, even if you borrow to do it. The exception is when cash is genuinely short: a discount you cannot fund is not a bargain.
If you are thinking of offering it
The same sum runs against you. You are paying your customer a high yearly rate to have your money a little sooner. That can still be right: if late payment is hurting you, or your own borrowing is expensive, faster cash has a price worth paying. Offer it knowing the price, and watch for customers who take the discount and still pay late.
Questions
Why is the rate so high?
Because the period is so short. A small percentage earned over twenty days repeats eighteen times in a year.
Simple or compounded: which should I use?
Simple is the usual quoted figure and is fine for a decision. Compounded is the true comparison with a rate that is itself compounded, such as most loans.
What if I pay on day 45 anyway?
Then the gap is 35 days, not 20, and the rate falls. Enter the day you really pay. Paying late has costs this sum does not see: the supplier’s goodwill, and your place in the queue when stock is short.
Is my data sent anywhere?
No. The sums are done in your browser.
Early payment discounts are not part of the product yet. That is why this tool stands alone.
Want to see who pays late before you decide?
OrbisVendor keeps each customer’s terms, what is owed and what is overdue beside their quotes and orders.
More free tools
Quote generator
Build a quote with up to three options, see your margin on every line, and print a clean PDF.
Open the tool →DOCUMENTSInvoice generator
Line discounts, more than one tax rate, payment terms that set the due date, and part payments.
Open the tool →DOCUMENTSPurchase order generator
A supplier, a separate deliver-to address, a deliver-by date, and tax and discount per line.
Open the tool →DOCUMENTSPacking slip generator
Ordered against shipped on every line, so a part shipment says what is still to follow.
Open the tool →