Early Payment Discount
A discount offered by suppliers for paying invoices before the standard due date.
Definition
An early payment discount is a price reduction offered by suppliers in exchange for faster payment. Common terms like "2/10 Net 30" mean a 2% discount if paid within 10 days, with full amount due in 30 days. Capturing these discounts can significantly improve profitability.
Why It Matters
A 2/10 Net 30 discount equals a 36% annualized return on the 20 days of early payment. Capturing these discounts is often the highest-return use of cash.
Examples
2/10 Net 30
Pay $10,000 invoice within 10 days, pay only $9,800. That's $200 saved for 20 days early payment.
Annualized return
2% for 20 days = 36% annualized return. Better than almost any other use of cash.
How Nexus AP Helps
Nexus AP identifies invoices with discounts, prioritizes them in approval workflows, and alerts AP when discount deadlines approach. Customers capture 95%+ of available discounts.
Start Free TrialFrequently Asked Questions
Should we always take early payment discounts?
Usually yes, unless you have very high cost of capital. The annualized return on 2/10 Net 30 is 36%, far exceeding typical borrowing costs.
How many discounts are we missing?
Many companies capture only 50-60% of available discounts due to slow processing. Automation typically increases capture to 95%+.
Category
processesRelated Terms
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