Work out early payment discount instantly with clear inputs, formula shown and shareable results.
Terms of 2/10 net 30 mean paying 2% more for 20 extra days of credit — an annualised cost of about 37%, far above any normal borrowing rate. That comparison is the whole decision: if you can borrow more cheaply than the implied rate, always take the discount.
Annualised cost
Cost % = Discount / (100 - Discount) x 365 / (Net days - Discount days) x 100
Effective annual rate
EAR = (1 + d/(1-d))^(365/extra days) - 1
Because the discount is a percentage of the invoice, but the amount you actually have at risk is the discounted price you would have paid.
Only when you have no access to cash at a lower rate than the implied cost, or when liquidity itself is the binding constraint.