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Dynamic Discounting Benefit Calculator

Work out dynamic discounting benefit instantly with clear inputs, formula shown and shareable results.

About Dynamic Discounting Benefit Calculator

Dynamic discounting replaces fixed terms with a sliding scale: the earlier the payment, the larger the discount, priced at an agreed annual rate. It lets the buyer deploy surplus cash at an attractive return while giving the supplier control over when they need liquidity.

Formulas

Discount percentage

Discount % = Annual rate x Days accelerated / 365

Discount earned

Discount = Invoice value x Discount %

Worked example

With the default values below, Dynamic Discounting Benefit Calculator returns Discount earned of $71,013.70. Change any input above and every figure here is recalculated in your browser.

Inputs used

Invoice value
4,800,000
Standard payment terms
60
Proposed payment day
15
Sliding-scale annual discount rate
12

Results

Discount earned
$71,013.70
Discount as % of invoice
1.4795%
Net payment amount
$4,728,986.30
Days accelerated
45

Step by step

  1. 1Values used
  2. 2Discount percentage
  3. 3Discount earned
  4. 4Discount earned= 71,013.70
  5. 5Discount as % of invoice= 1.4795
  6. 6Net payment amount= 4,728,986.30
  7. 7Days accelerated= 45

Assumptions and limits

  • The result is derived only from the 4 inputs listed above. Anything not among them is not part of the calculation.
  • In particular, this calculator does not take inflation, tax or fees or charges into account.
  • Figures are rounded for display to 4 decimal places, so totals built from several rounded parts can differ slightly from the unrounded arithmetic.

How these calculators are built and tested is described on the Methodology page. If a figure looks wrong, please report it.

Frequently Asked Questions

How is this different from a fixed 2/10 net 30 term?

It is continuous rather than a single step, so the supplier can choose any payment date and both parties are priced fairly at every point.

Who sets the annual rate?

It is negotiated, usually between the supplier's borrowing cost and the buyer's return on cash, which is where both parties gain.

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