The Complete Guide to Early-Payment Discounts (2/10 Net 30)
By Arshi Khan, Founder of Just4Marketing · Last reviewed October 2026
Many suppliers offer a small discount for paying an invoice early — '2/10 net 30' means 2% off if you pay within 10 days, otherwise the full amount is due in 30. A 2% saving sounds small, but it's earned for paying just 20 days sooner, which makes it one of the best returns available on a business's cash. This guide shows how to work out its real annual value.
The formula
Annual cost = discount ÷ (100 − discount) × 365 ÷ (net days − discount days). The first part is the cost of keeping the money; the second converts that period into a year. The compounded version, (1 + discount ÷ (100 − discount))^(365 ÷ days) − 1, assumes you could repeat the same trade all year.
Common terms compared
| Terms | Annual cost (simple) | Annual cost (compounded) |
|---|---|---|
| 1/10 net 30 | 18.43% | 20.13% |
| 2/10 net 30 | 37.24% | 44.59% |
| 2/10 net 60 | 14.90% | 15.89% |
| 3/15 net 45 | 37.63% | 44.86% |
Making the decision
Compare with your cost of cash
If the annual cost is higher than your credit line's interest rate, borrowing to pay early still saves money.
Pay on day 10, not day 1
Paying at the end of the discount window keeps the cash longest while still earning the discount.
Don't stretch past the net date
Paying late to 'make up' for a skipped discount risks late fees and supplier relationships.
Frequently asked questions
What does 2/10 net 30 mean?
You can take a 2% discount if you pay within 10 days of the invoice date; otherwise, the full invoice is due within 30 days.
What is the annual cost of not taking the discount?
For 2/10 net 30, skipping the discount is like borrowing 98% of the invoice for 20 days at a 2/98 cost. Annualized, that's 2 ÷ 98 × 365 ÷ 20 = 37.24% (or 44.59% with compounding). Unless your cash earns or costs more than that, paying early wins.
Should sellers offer early-payment discounts?
It can speed up cash flow and reduce late payments, but it's expensive financing from the seller's side. Compare the discount's annual cost with what a line of credit or invoice financing would cost you.
Does the discount apply to taxes and shipping?
It depends on the terms. Many suppliers apply it only to the goods or services portion. Check the invoice terms before calculating the discounted amount.