Supplier payment terms
Early Payment Discount Calculator
See what paying early actually saves.
Compare one invoice’s discount with the cost of funding an earlier payment. Buyer-side estimate; enter your agreed terms and funding rate.
One-invoice comparison
Net saving after funding cost
USD 135.56
Compared with paying the full eligible amount on day 30.
Pay on day 10 instead
USD 9,800.00
Funds committed 20 days sooner.
- Discount saved
- USD 200.00
- Less: funding interest
- USD 64.44
- Less: extra financing fee
- USD 0.00
Simple annualized discount rate
37.24%
365-day basis · before financing fees · not a compounded return or a loan quote.
The discount exceeds the modeled interest and fee. Confirm available cash or credit, other near-term bills and the supplier’s eligibility rules before paying.
From invoice to cash decision
Read the terms before comparing the cost
A 2/10 net 30 term offers a 2% discount if the qualifying payment is made by day 10; otherwise the full amount is due on day 30. This model compares those two payment days. The difference is 20 days, not 30. The Vancouver Community College cash-discount lesson explains this invoice notation.
Match the eligible amount
Use the amount to which the supplier actually applies the discount, after any agreed trade discount. Do not include tax, freight or other charges unless the contract makes them eligible. Noneligible charges are outside this comparison.
Use consistent days
Both day numbers start from the same agreed reference, such as the invoice date. Day 0 is allowed for immediate payment. The tool does not interpret end-of-month terms, weekends, holidays or settlement delays.
Price the funding
Enter a simple annual borrowing rate for the early payment amount, and any extra financing fee. Interest runs only for the days paid early. Use 0% and zero fee to see the cash discount alone; doing so does not prove your cash has no opportunity cost.
How the comparison works
Let A be the eligible invoice, d the discount as a decimal, r the annual funding rate as a decimal, t the days paid early, Y the selected year basis, and F the fee.
- Discount D = A × d, rounded to cents.
- Early payment P = A − D.
- Interest I = P × r × t ÷ Y, rounded to cents.
- Net saving = D − I − F.
- Simple annualized rate = (D ÷ P) × Y ÷ t × 100%.
The discount is measured against the smaller payment made early. ACCA’s settlement-discount explanation uses that same periodic ratio, then compounds it for an effective annual rate. This tool uses simple scaling instead. The displayed annual rate is a comparison measure, not profit earned over a year.
Worked example: 2/10 net 30
Illustrative USD 10,000 invoice · 12% funding · no fee · 365 days
| Eligible invoice | 10,000.00 |
|---|---|
| Discount at 2% | 200.00 |
| Early payment on day 10 | 9,800.00 |
| Days advanced | 20 |
| Interest: 9,800 × 12% × 20 / 365 | 64.44 |
| Net saving: 200 − 64.44 | 135.56 |
| Simple annualized rate | 37.24% |
If the funding rate rises to 50%, interest becomes 268.49 and net saving becomes −68.49. A 2% discount can therefore produce either a saving or an extra cost, depending on the funding inputs.
What this estimate includes—and what needs checking
The fee is an incremental cost of financing this invoice. It is deducted once and is not added to the financed principal; no interest on fees is modeled. All cash figures use two decimal places, with half-cent ties rounded up. The rate uses the resulting rounded cash discount, so tiny invoices can produce a different rate from the unrounded percentage formula.
Interest is simple, with no compounding or repayments before the net due day. Select the basis in your funding agreement: 360 or 365. This is not a statutory APR calculation and does not price a factoring arrangement, taxes, late penalties or foreign exchange. It compares paying at the discount deadline with paying at the agreed net deadline, not paying after it.
A positive saving does not establish that you have spare cash or approved credit. Verify settlement cutoffs, available funds and other bills. Business Queensland’s payment-terms guidance emphasizes agreeing and documenting the actual terms. This calculator neither confirms supplier eligibility nor initiates a payment.
Continue the purchasing decision
About This Calculator
Compare an early payment discount with simple funding interest and fees. Calculate net savings, the payment amount and the annualized cost of missing a discount.
Frequently Asked Questions
Can I compare 1/10 net 30 or 2/10 net 60?
Yes. Enter the discount percentage and the two day numbers separately. Both days must use the same reference date. The full payment day must be later than the discount deadline. The tool compares paying at those deadlines, not a later overdue date.
Is the simple annualized discount rate a compounded return?
No. It scales the discount divided by the early payment amount over a 360- or 365-day year without compounding. It excludes financing fees. A compounded effective annual rate uses a different formula and is not shown here.
Can I change the currency?
Yes. The currency selector changes labels only; it does not convert values. Enter the eligible invoice and financing fee in the same currency. This worksheet rounds cash amounts to two decimal places.
Does this calculate discounts for partial payments?
No. It assumes the whole eligible invoice amount is settled at the discount deadline. Partial payments, end-of-month terms, taxes, credit notes and settlement cutoffs depend on the agreement and need separate treatment.
The SuperCalc Editorial Team maintains calculator interfaces, formula notes, examples, and supporting explanations. Methods, assumptions, source links, and review depth vary by calculator and are documented on the relevant page where available.