Early payment discount
Should you pay early to get a discount (e.g. 2/10 net 30)? The equivalent annual rate tells you.
How it works
Equivalent annual rate = discount / (1 − discount) × 365 / (due date − discount period). If it beats your cost of funds, paying early is worth it.
Results are for guidance only and do not replace professional advice.
Worked example
With the default values:
- Invoice amount12000
- Discount (%)2
- If paid within (days)10
- Normal due date (days)30
- Your cost of funds (%/yr)6
you get:
- Equivalent annual rate37.2 %
- Saving by paying early€240.00
- Pay within 10 days€11,760.00
- Funding it would cost€38.66 over 20 days
Frequently asked questions
How does the “Early payment discount” tool work?
Equivalent annual rate = discount / (1 − discount) × 365 / (due date − discount period). If it beats your cost of funds, paying early is worth it.
What do I need to enter?
Just fill in: invoice amount, discount, if paid within, normal due date, your cost of funds. The result updates as you type.
Can you give an example?
Invoice amount: 12000; Discount (%): 2; If paid within (days): 10; Normal due date (days): 30; Your cost of funds (%/yr): 6 → Equivalent annual rate: 37.2 %; Saving by paying early: €240.00.
Is this calculator free, and is my data private?
Yes. HOD Calc is completely free with no sign-up. The calculation runs in your browser: nothing you type is sent or stored.