Net 30 / Payment Terms Calculator

What "2/10 Net 30" is really worth

The famous result hiding in these terms: skipping a 2/10 Net 30 discount costs the buyer 36.7% annualized. You're "borrowing" for 20 extra days at 2% of the invoice: an APR no sane CFO pays if any credit line is cheaper. This calculator runs that conversion for any discount and terms, plus late-fee accrual, so both sides of an invoice can see what the paper actually costs.

Sellers: terms are a pricing decision

Every day of Net terms is an interest-free loan you're extending. Net 60 on $50k/month of invoices means $100k permanently parked in receivables: money you can't use, at your cost of capital. Early-pay discounts buy that float back but at the same brutal APR the buyer enjoys. Often the better lever: shorter terms for new clients, deposits on projects, and the standard 1.5%/month late fee stated on every invoice (uncharged fees train slow payers).

Buyers: the discount is usually free money

If you have the cash or credit under ~30% APR, take every early-pay discount offered: few investments return 36% risk-free. The exception is genuine cash scarcity, where the expensive float is still cheaper than a missed payroll.

The general formula (works for any discount, not just 2/10 net 30)

The 36.7% figure comes from one formula: annualized cost = [discount% ÷ (100% − discount%)] × [360 ÷ (net days − discount days)]. Swap in different terms and the number moves fast, and not proportionally. 1/10 net 30 (half the discount) isn't half the APR by coincidence: it's [0.01/0.99] × [360/20] = 18.2%. But 2/10 net 60, the same 2% discount as the famous case with just a longer net period, drops to [0.02/0.98] × [360/50] = 14.7%. Stretching the net period is a bigger lever on the buyer's effective rate than trimming the discount percentage. A seller offering "2% but Net 60 instead of Net 30" is quietly cutting the discount's real value by more than half while the headline "2%" looks unchanged.

EOM and ROG dating: the clock this calculator assumes you're using

"Net 30" by default starts the clock on the invoice date, and that's what the formula above assumes. Two common variants change the math entirely. EOM (end-of-month) terms like "2/10 EOM" start both the discount and net clocks on the last day of the invoice month, not the invoice date itself: an invoice cut on the 3rd effectively gets up to 27 extra float days before the 10-day discount window even opens. ROG (receipt of goods) dating starts the clock when the buyer receives the shipment instead, common on freight-heavy orders where transit alone runs a week or two. Run either through the standard formula using the invoice date instead of the real clock-start date and the APR comes out wrong in the buyer's favor. Check which dating convention is on the PO before assuming Net 30 means what it usually means.

When the stated late fee doesn't survive contact with the law

1.5%/month sounds like flat 18% APR, but if it compounds monthly (accruing on unpaid fees, not just principal) the effective annual rate is closer to 19.56%: (1.015)^12 − 1. Most invoice templates don't specify simple vs. compounding, and that gap is exactly what gets disputed in collections. The bigger risk is usury: a handful of states cap contractual interest below 18%, and charging above the cap without a stated, signed agreement can make the fee unenforceable rather than just capped down. State the exact rate, in writing, on the invoice or contract before the work starts. Leave it unstated and courts often default you to the jurisdiction's statutory rate instead, which is usually lower. Our invoice generator keeps that language on the template automatically.

Related tools

Set your rates so waiting doesn't hurt with the billable hours calculator, charge correct late fees via the invoice-ready terms in our free invoice generator, and see receivables' effect on survival in the break-even calculator.