Invoice Discount / Early Payment Discount Calculator

An early payment discount (also called a prompt payment discount or cash discount) is a price reduction offered to customers who pay their invoices before the standard due date. The most common format is written as "2/10 Net 30" - meaning the buyer gets a 2% discount if they pay within 10 days of the invoice date, otherwise the full amount is due in 30 days. Other common terms include 1/10 Net 30 (1% discount within 10 days), 2/10 Net 60 (2% within 10 days, due in 60), and 1/15 Net 30 (1% within 15 days, due in 30). Our early payment discount calculator helps you evaluate these offers by computing the discount amount, effective annualized rate, and comparing the savings against alternative investment returns.

1. 1. Enter Invoice & Discount Terms: Start by selecting a common discount term preset (2/10 Net 30, 1/10 Net 30, etc.) or enter your own values. Input the invoice amount, discount percentage, discount period in days, and net payment days. The early payment discount calculator also accepts an alternative investment return rate so you can compare taking the discount vs investing the money elsewhere.
2. 2. Review Your Discount Analysis: The invoice discount calculator computes the discount amount, the amount due if paid early, the effective annualized rate of the discount, and the number of days saved. A visual timeline shows the discount period, the savings window, and both deadlines so you can see the payment structure at a glance. The effective annualized rate is calculated using the formula: (discount% / (100 - discount%)) × (365 / (net days - discount days)) × 100.
3. 3. Compare Discount vs Investment: The calculator compares the savings from taking the discount against what you'd earn by investing the invoice amount at your specified alternative return rate over the days saved. A clear recommendation is shown: take the discount if its effective annualized rate exceeds your alternative return, or invest instead if the reverse is true. A comparison bar chart visualizes the difference.

• Discount Amount: The actual dollar savings from paying early - calculated as the invoice amount multiplied by the discount percentage. For a $5,000 invoice with 2/10 Net 30 terms, the discount is $100.
• Amount Due Early: What you need to pay if you take the discount - the invoice amount minus the discount. For $5,000 with 2% discount: $4,900.
• Effective Annualized Rate: The equivalent annual return of taking the discount. For 2/10 Net 30 (2% discount for paying 20 days early), the effective annualized rate is approximately 37.2% - one of the highest returns available in business finance.
• Days Saved: The number of days between the discount deadline and the net payment date. This is the period over which your "investment" of paying early generates returns.
• Discount vs Invest Comparison: A side-by-side comparison of the dollar savings from the discount versus the earnings from investing at your alternative rate. The calculator provides a clear recommendation based on which option yields more value.

Early payment discounts can yield remarkably high effective annualized returns. Here are the rates for common terms: 2/10 Net 30 yields approximately 37.2% annualized (2% ÷ 98% × 365 ÷ 20). 1/10 Net 30 yields about 18.4% (1% ÷ 99% × 365 ÷ 20). 2/10 Net 60 yields about 14.9% (2% ÷ 98% × 365 ÷ 50). 1/10 Net 60 yields about 7.4%. 0.5/10 Net 30 yields about 9.2%. These rates often far exceed typical investment returns, making early payment discounts a compelling financial opportunity for businesses with available cash. Note that this calculator provides estimates based on the standard discount formula. Your actual terms may vary based on your specific agreements with suppliers. All calculations run locally in your browser - no data is sent to any server.