Early Payment Discount Calculator

The Hidden Gold in Payment Terms

"2/10 net 30" means: take a 2% discount if you pay within 10 days, otherwise the full amount is due in 30 days. It sounds small, but the math tells a completely different story.

You're earning 2% for paying just 20 days early. Annualize that and you get a staggering return — better than almost any investment you can find.

For 2/10 net 30: (0.02 ÷ 0.98) × (365 ÷ 20) = 37.2% annualized. That's better than the stock market's long-term average of ~10%.

Common Early Payment Terms

When to Borrow Money for Early Payment Discounts

The rule is simple: if the annualized discount rate exceeds your borrowing cost, take the discount — even if you need to borrow money to do it.

Example: Borrow at 8% annually to earn a 37.2% annualized return on early payment = 29.2% net gain. That's free money.

Only skip the early payment discount if your cash flow is critically tight, your credit line is maxed out, or the annualized rate is lower than your borrowing cost.