Payment Terms & Early Discount Calculator

About the Payment Terms & Early Discount Calculator

Type the payment terms the way they are written on the invoice — Net 30, 2/10 net 30, Net 30 EOM, EOM, 15 MFI, 10th prox or due on receipt — and the invoice date. The calculator says how it reads the terms in plain words, gives the due date and, for a discount, the last day to pay with the discount, the saving on your amount, and what skipping the discount really costs as a yearly interest rate, worked out both simply and compounded.

Due dates can move off weekends and holidays: choose the next working day, the one before, or the banks' modified following rule, with your country's weekend and your own holiday dates. A table puts the same invoice under thirteen common terms side by side, and the dates go into your calendar as a file.

Without a pass the free preview shows the due date in full and the first rows of the table; the other figures, the rest of the table, the copied summary and the downloads come with a Pro pass.

What the usual terms mean

• Net 30 (also n/30 or 30 days): the full amount is due 30 days after the invoice date. Net 7, 10, 14, 15, 45, 60 and 90 work the same way.
• 2/10 net 30: 2% off if the buyer pays within 10 days of the invoice date; otherwise the full amount is due in 30 days. OpenStax explains the notation and the discount period in What Is Trade Credit?.
• EOM (end of month): due on the last day of the month the invoice is dated in.
• Net 30 EOM: due 30 days after the end of the invoice month, so every invoice dated in one month is due on the same day.
• 15 MFI (month following invoice), also written 15th prox (proximo, next month): due on the 15th of the month after the invoice month. A day the month does not have (31 MFI in a 30-day month) falls on its last day.
• 2/10 EOM: a discount for paying within 10 days of the end of the invoice month. Type the net period with it, as in 2/10 EOM net 30 EOM, because terms written without one leave the full amount’s due date open.
• Due on receipt, COD (cash on delivery) and CIA (cash in advance): no credit period.

Wording varies between suppliers and countries — some write “30 days EOM” for the end of the following month — so the calculator always says how it read your terms; adjust the fields when your contract means something else.

The cost of skipping an early-payment discount

Paying on the due date instead of the discount deadline is like borrowing the discounted amount for the days in between and paying the discount as interest. With a discount of d (2% = 0.02), X days between the two dates and B days in a year:

• Simple (nominal) annual cost = d ÷ (1 − d) × B ÷ X
• Compounded (effective) annual cost = (1 + d ÷ (1 − d))^(B ÷ X) − 1

For 2/10 net 30 on a 365-day year that is 0.02 ÷ 0.98 × 365 ÷ 20 = 37.24% simple and 44.59% compounded. OpenStax uses a 360-day year and gets 36.73% for the same terms; choose the year length your textbook, bank or finance team uses. The calculator counts X between the actual dates, after any move off a weekend or holiday.

Take the discount or keep the cash?

Compare the annual cost with what you pay to borrow, or earn on spare cash. When skipping a 2/10 net 30 discount costs about 37% a year and an overdraft costs 12%, borrowing to pay early is cheaper; when your cash would earn more than the discount’s rate elsewhere, or you cannot get credit at all, paying on the due date can make sense. A discount is only worth its rate if you would really pay on the due date otherwise: paying late on top costs more and can carry interest of its own (see the Late Payment Interest Calculator).

Weekends, holidays and long terms

Contracts often say what happens when a payment date falls on a day banks are closed. Next working day moves it on, previous working day brings it forward, and modified following moves it on unless that would cross into the next month, in which case it comes back — the usual rule for payment dates in banking. Your country’s weekend is ticked from the country chosen at the top of the page.

Long credit periods have limits in some places: under the EU late-payment directive payment periods between businesses over 60 days must be expressly agreed and not grossly unfair to the supplier, and public authorities have 30 days as a rule; GOV.UK’s guidance gives the same 60 and 30 days for the UK.

Limitations

• Terms are read from the usual notations. A contract can define them differently (for example from the date goods are received, or “30 days EOM” as the end of the following month): check the sentence the calculator shows and change the fields to match your contract.
• Holidays are the ones you enter: the calculator has no list of public or bank holidays.
• The annual cost is a way to compare the discount with other money; it is not an interest rate anyone charges you.
• Amounts are rounded to the currency’s smallest unit; sales tax rules on discounts (whether the tax is worked out before or after the discount) differ by country and are not applied.

Privacy

Everything happens in your browser. What you enter or open here is not uploaded or stored by MySmartCoPilot.