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Early Payment Discount & Trade Credit Cost Calculator
Calculate an early-payment amount and the simple annualized cost of paying the full invoice later under entered discount terms.
Early-payment discount calculator
Calculate an early-payment amount and the simple annualized cost of paying the full invoice later under entered discount terms.
YOUR RESULT LIVE CALCULATION
Discounted eligible invoice balance
$9,800early payment
SIMPLE 365-DAY ANNUALIZATIONOne less spreadsheet to keep open.
- Invoice discount savings
- $200
- Full balance if paid later
- $10,000
- Additional credit days
- 20 days
- Simple annualized cost of foregoing discount
- 37.24%
The annualized figure is not compounded APY or a borrowing recommendation. Confirm the actual payment agreement.
BEHIND THE NUMBER
How the calculation works
Enter both days relative to the same invoice date. For 2/10 net 30, a $10,000 eligible balance becomes $9,800 on day 10, saving $200. Foregoing the discount retains that $9,800 for 20 extra days at a $200 cost. The displayed annualization uses a fixed 365-day year and is not compounded APY.
Savings = invoice x d; early payment = invoice x (1 - d); simple annualized cost = d / (1 - d) x 365 / (net day - early day)
When this calculation helps
An early-payment discount exchanges earlier cash outflow for a reduced invoice amount. Compare the entered payment dates and discount basis over the same invoice scope.
Check the interpretation
Annualizing a short-period discount makes comparison easier but does not establish the best use of cash. Verify eligibility, payment timing, liquidity constraints, and contractual treatment before acting. The calculator does not initiate a payment or provide financing advice.
This scenario does not recommend borrowing or determine contract terms. Confirm discount eligibility, partial payments, taxes, dates, liquidity, bank costs, and the actual agreement separately. The net due day must be later than the discount day.
OpenStax: interpreting trade credit discount termsGood to know
Is the annualized percentage compounded?
No. It is a simple annualization of the cost over the extra credit days, using 365 days.
Can I enter a 100% discount?
No. The annualized model divides by the early-payment balance, which would be zero. Discounts must be below 100%.