Early payment discounts
A 2% discount for paying 20 days early works out at about 37% a year, which makes it an expensive way to get paid sooner.
What 2/10 Net 30 means
2% off if the invoice is paid within 10 days, otherwise the whole amount within 30. The first number is the discount, the second is how long it lasts, and the Net figure is the ordinary term. For example, on 10,000 the client either pays 9,800 (200 off) by day 10, or pays the full 10,000 by day 30, 20 days later.
| Discount | Invoice amount × the discount rate |
|---|---|
| They pay | Invoice amount − the discount |
| Discount deadline | Invoice date + the discount days |
| Full amount due | Invoice date + the Net days |
Why it costs far more than 2%
A 2% discount on 2/10 Net 30 costs you about 37% a year. The 2% buys the 20 days between day 10 and day 30, and it comes out of the 98 you receive rather than the 100 you invoiced. Annualised, it looks like this:
| The rate | discount ÷ (100 − discount) × 365 ÷ (Net days − discount days) |
|---|---|
| 2/10 Net 30 | 2 ÷ 98 × 365 ÷ 20 = about 37% a year |
| 1/10 Net 30 | 1 ÷ 99 × 365 ÷ 20 = about 18% a year |
I recommend comparing the terms against that figure before you offer them. If the early cash would cover something that costs you less than 37% a year, the discount is the expensive way to get it. However, if it would cover an overdraft, a card balance or an invoice you are about to be late on yourself, it may well be the cheap one.
The discount window has to be shorter than the term
If the window matches the term, the discount buys nothing. Say you offer "2/30 Net 30". You give away 2%, and the money was due that day anyway. The gap between the two dates is the only thing the discount pays for, so with no gap there is no annual rate to work out, and the calculator says so instead of printing a figure. If you offer a discount at all, I'd make the window clearly shorter than the term, as 2/10 Net 30 does.
An offer, not a price cut
Send the invoice at its full amount and put the offer in the notes. The discount applies only if the payment arrives inside the window, which is why Create this invoice on the calculator opens the document at full value, with the Net date as its due date. An invoice issued at the discounted figure hands the discount over whenever they pay, including late. I'd keep the total at full value every time.
Early payment discount, late fee, invoice discount
All three change what gets paid, in different ways:
- Early payment discount: a conditional reduction for paying sooner.
- Late fee: a charge added for paying after the due date. Late payment fees covers it, and the late payment fee calculator does the sum.
- Invoice discount: comes straight off the total for everyone, whenever they pay, and belongs in the invoice calculator instead.
Short version: 2/10 Net 30 means 2% off if paid within 10 days, otherwise the full amount within 30. That 2% buys 20 days and comes out of the 98 you receive, which annualised is about 37% a year: 2 ÷ 98 × 365 ÷ 20.
Last updated 22 September 2026