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Key takeaways
- 2/10 net 30 means the buyer may deduct 2 percent if it pays within 10 days. Otherwise the full amount is due in 30 days.
- Skipping the discount costs the buyer about 37 percent a year in effect, on a simple annual basis.
- It is almost always worth taking if you have cash or a cheaper credit line than that.
- For the seller, the discount is a price for faster cash. Compare it with its own borrowing cost.
Free PDF and Excel: Early payment discount calculator and decision sheet. Get it below
What 2/10 net 30 means
2/10 net 30 is a payment term that offers a 2 percent discount for payment within 10 days of the invoice date, with the full amount due within 30 days.
The first number is the discount percent, the second is the discount days and the last is the full due period. Other versions follow the same pattern, such as 1/15 net 45.
The maths
The buyer chooses between paying 98 on day 10 or 100 on day 30. Paying early costs 98 to save 2, which is a return of 2 over 98 for 20 days. Annualised that is 2 / 98 times 365 / 20, about 37.2 percent.
Enter the discount percent, the discount days and the net days. The tool shows the effective annual rate. It uses a simple, not compounded, calculation.
An invoice for 50,000 is on 2/10 net 30. Paying on day 10 costs 49,000 and saves 1,000. The buyer would need to earn more than 37 percent a year on that cash for refusing the discount to make sense.
A buyer who pays on day 30 is, in effect, borrowing at that rate from the supplier. Most treasury teams have cheaper money.
Free PDF and Excel
Early payment discount calculator and decision sheet
Work out the true annual rate of an early payment discount and decide whether to take it.
- Rate worksheet
- Decision rules
- Seller viewpoint
- Excel calculator
From the seller's side
- The discount is a cost. If your cost of funds is 12 percent, a 37 percent discount rate is expensive money.
- It fits when you need cash, have thin margins and a risky receivables book, or pay your own suppliers early.
- Offer it to buyers who would otherwise pay late.
- State it plainly on the invoice and contract. See payment terms.
Dynamic discounting
Fixed 2/10 terms are crude. Some buyers use dynamic discounting, where the discount shrinks the longer the buyer waits, so any early payment earns a fair rate. Ask your finance or procurement platform whether it offers it.
- Discount, discount days and net days are stated.
- The discount is calculated on the invoice total or the pre-tax amount, as the contract says.
- Payment run timing makes day 10 achievable.
- Tax treatment was checked with your accountant.
Last checked: 19 October 2026. Simple annual rate calculation. Accounting and tax treatment differ by country.
Frequently asked questions
What does 2/10 net 30 mean?
A 2 percent discount if paid within 10 days, otherwise full payment within 30 days.
How do you calculate the annual cost of 2/10 net 30?
Discount divided by 100 minus discount, times 365 divided by the days saved. For 2/10 net 30 that is about 37 percent.
Should a buyer always take the discount?
Usually, unless its cost of cash is higher than the implied rate.
Is the discount taken on tax too?
It depends on the contract. Say whether it applies to the pre-tax or the total amount.
What is dynamic discounting?
A sliding discount that grows the earlier the buyer pays.