Early Payment Discount Calculator

About this calculator

Trade-credit terms like “2/10 net 30” mean a buyer gets a 2% discount if they pay within 10 days, but otherwise owes the full amount by day 30 — offering an early-payment discount is how suppliers speed up cash collection. That discount is worth far more than its face percentage suggests: giving up a 2% saving to hold onto cash for only 20 extra days works out to a very high effective annual interest rate once annualized.

This calculator converts any supplier's discount terms into that effective annual percentage rate, using the standard formula that annualizes the discount over the number of days gained by paying early. It's used by accounts-payable teams and small-business owners to decide, in hard numbers, whether taking the discount (often equivalent to a 30–40%+ annual return) beats whatever else the cash could earn, or whether it's cheaper to simply pay on time or draw on a line of credit to fund early payment.