Net-30 is the most common payment term in business-to-business (B2B) trade: a supplier bills you, and you have 30 days to pay the full invoice. The catch is that many suppliers sweeten the deal with an early-payment discount — "2/10 net 30" means you can knock 2% off if you pay within 10 days, otherwise the whole bill is due in 30. On the surface, 2% sounds small. Annualized, it is not. This Net-30 calculator from Smekys shows you exactly what that discount is worth in dollars, and what it really costs your business when you choose to skip it and pay on the net date instead.
Slide the inputs and every figure updates instantly. Compare paying early against stretching to net terms, and see whether taking the discount beats borrowing from your bank or your credit line.
How to Use
- Enter the Invoice Amount — the total on the supplier's bill before any discount.
- Set the Early-Pay Discount as a percentage. On a standard "2/10 net 30" invoice this is 2. If the invoice shows no discount at all, set it to 0.
- Type the Discount Window in days. This is how long you have to pay and earn the discount — 10 days in the classic 2/10 net 30 example.
- Set the Net Due days — 30 for net-30, 60 for net-60, and so on. This is the final due date for the full invoice.
- Read the result card: the discount you earn, the reduced early-payment amount, the full net amount, and — most importantly — the effective annual cost of skipping the discount.
The engine uses the standard trade-credit formula taught in corporate finance (a 360-day "banker's year"): (d / (100 − d)) × (360 / (net days − discount days)), where d is the early-pay discount percentage. This is the same calculation the CFO team at a mid-market buyer runs before approving early-payment terms with vendors.
How the Effective Annual Cost Is Calculated
Suppose an invoice is $10,000 with terms 2/10 net 30. You can either pay $9,800 on day 10 or pay $10,000 on day 30. Choosing the second option means you are effectively borrowing $9,800 for an extra 20 days (days 11 through 30), and paying $200 of interest for that 20-day loan.
The periodic rate over those 20 days is 200 / 9,800 = 2.0408%. There are 360 / 20 = 18 such 20-day periods in a banker's year, so the annualized rate is 2.0408% × 18 = 36.7%. That is the number that should wake you up: by routinely forgoing a 2/10 net 30 discount, your business is paying the equivalent of a 36.7% annual interest rate on that trade credit. Unless you can borrow cheaper than that from a bank line of credit, you should almost always take the discount.
If the discount percentage is 0, the calculator returns an effective annual cost of 0% because there is no incentive to pay early. If the discount window equals or exceeds the net due date, there is no "extra borrowing" either, so the cost also collapses to 0.
Examples
Example 1 — The textbook 2/10 net 30 invoice. A supplier sends you a $10,000 bill with terms 2/10 net 30. The discount is $200, so paying on day 10 costs $9,800. Waiting until day 30 costs $10,000. The extra 20 days of credit cost you $200, which annualizes to 36.7%. If your bank line of credit is at 9%, borrowing from the bank to pay early is a no-brainer: you save $200 on a $9,800 balance that would have cost roughly $49 in bank interest for those 20 days.
Example 2 — A no-discount net-30 invoice. Some vendors write plain "net 30" with no early-payment offer. Set the discount to 0%. The discount amount is $0, the early payment equals the full invoice, and the effective annual cost is 0%. In that case, you should always pay on day 30 (not day 1) to keep your cash as long as possible — there is no reward for paying early.
Example 3 — Large invoices and net-45 terms. A $1,000,000 invoice carries terms 1/15 net 45. The discount is $10,000, so early payment is $990,000. You are effectively borrowing $990,000 for 30 extra days at a cost of $10,000. Annualized, that works out to roughly 12.1% — still well above most working-capital loan rates, but far cheaper than the 36.7% of 2/10 net 30. Run this number before you automatically skip every discount.
Example 4 — 3/15 net 60 on a $25,000 bill. The discount is $750, so you pay $24,250 within 15 days. Stretching to day 60 means 45 extra days of credit. Annualized cost: (3/97) × (360/45) = 24.7%. A high effective rate like this is a strong signal to pull cash forward and take the discount.
FAQ
What does "net 30" mean on an invoice?
Net 30 means the full invoice amount is due no later than 30 days after the invoice date. It is the default payment term used by most B2B suppliers in the United States. If the invoice also shows "2/10" in front of it, a 2% discount is offered when you pay within the first 10 days.
How does 2/10 net 30 work?
"2/10 net 30" is shorthand: 2% discount if paid within 10 days, otherwise the entire balance is due in 30 days. On a $10,000 invoice, paying by day 10 costs $9,800; paying on day 30 costs $10,000. The $200 difference is effectively the interest on a 20-day loan.
What is the effective annual cost of skipping a 2/10 net 30 discount?
It is about 36.7%, using the standard formula (2 / 98) × (360 / 20). That is far higher than almost any bank loan, credit-card cash advance, or equipment-financing rate, which is why treasury teams almost always take the discount when they can.
Should I take the early-payment discount?
Compare the discount's effective annual cost against your cheapest source of borrowed money. If your line of credit costs 8–12% and skipping the discount costs 36.7%, borrow from the bank and pay early. If your only financing source is a credit card at 24% APR, the discount still wins. If you have idle cash sitting in a low-yield savings account, taking the discount is essentially a risk-free 36.7% return on that cash for those 20 days.
Why does the calculator use 360 days instead of 365?
The 360-day "banker's year" is the traditional convention in trade-credit and commercial lending formulas, going back to when interest was calculated by hand on tables. It is the convention used by Investopedia, Corporate Finance Institute, and most corporate-finance textbooks. Using 365 instead nudges the 2/10 net 30 figure from 36.7% to about 37.2% — the practical conclusion is unchanged.
What is the difference between net 30 and due on receipt?
"Due on receipt" means the invoice is payable immediately upon delivery — there is no free credit period at all. Net 30 gives you a full month of free (or discounted) credit before payment is due. Net terms are a form of supplier financing that effectively lets buyers extend their operating cycle.
Is net 30 good for my business?
For buyers, net-30 terms are a low-cost, unsecured source of working capital — especially when paired with an early-payment discount you can actually earn. For sellers, net 30 ties up cash for a month and can strain cash flow, which is why many suppliers factor invoices or offer dynamic discounting to get paid sooner.
Disclaimer
This Net-30 calculator is provided by Smekys for informational purposes only and does not constitute financial, accounting, tax, or legal advice. Effective annual cost figures use the standard 360-day banker's-year convention and rounded inputs; actual supplier terms, late fees, and cash-flow decisions vary by invoice, jurisdiction, and negotiation. Always confirm your payment terms directly with your vendor and consult a qualified accountant or financial advisor before making borrowing or discounting decisions.