{"success":true,"version":"v1","request":{"tool":"get_calculator_schema","calculator_id":"early-payment-discount"},"result":{"entity_type":"calculator","id":"early-payment-discount","calculator_id":"early-payment-discount","canonical_url":"https://tttkmbb.com/finance/early-payment-discount","name":"Early Payment Discount Calculator","title":"Early Payment Discount Calculator – Cost of Trade Credit for Terms such as 2/10 Net 30","category":"finance","category_name":"Finance","tool_name":"calculate_early_payment_discount","featured_mcp_tool":false,"description":"Evaluates cash-discount payment terms such as 2/10 net 30: the discount on an invoice, the amount due if paid early, and the annualized simple and effective interest rate implied by forgoing the discount (the cost of trade credit).","use_when":"A supplier offers a percentage discount for paying an invoice within a few days and you want the annualized return of paying early, or whether borrowing to take the discount is worthwhile.","do_not_use_when":"You need a plain price reduction without payment terms (use discount), or a late-payment penalty or interest charge. Informational; not financial advice.","inputs":[{"name":"discount_percent","label":"Discount","type":"number","unit":"%","required":false,"default":2,"min":0,"max":99,"description":"Percentage taken off the invoice when paid within discount_days (the 2 in 2/10 net 30).","example":2},{"name":"discount_days","label":"Discount period","type":"integer","unit":"days","required":false,"default":10,"min":0,"max":365,"description":"Days from the invoice date during which the discount applies (the 10 in 2/10 net 30).","example":10},{"name":"net_days","label":"Net payment period","type":"integer","unit":"days","required":false,"default":30,"min":1,"max":730,"description":"Days until the full amount is due without discount (the 30 in 2/10 net 30); must exceed discount_days.","example":30},{"name":"invoice_amount","label":"Invoice amount","type":"number","required":false,"default":1000,"max":1000000000000,"exclusive_min":0,"description":"Gross invoice amount before the discount.","example":1000},{"name":"borrowing_rate_percent","label":"Borrowing rate (optional)","type":"number","unit":"%","required":false,"min":0,"max":1000,"description":"Annual rate at which you could borrow to pay early (e.g. a credit line APR); used only for the recommendation.","example":8}],"outputs":[{"name":"discount_amount","label":"Discount amount","type":"number","decimals":2,"description":"invoice_amount × discount_percent / 100."},{"name":"amount_if_paid_early","label":"Amount due if paid early","type":"number","decimals":2,"description":"invoice_amount − discount_amount."},{"name":"days_of_credit_given_up","label":"Days of credit given up","type":"integer","unit":"days","decimals":0,"description":"net_days − discount_days: how much earlier the cash leaves."},{"name":"implicit_rate_for_period_percent","label":"Cost for the period","type":"number","unit":"%","decimals":2,"description":"discount / (1 − discount) × 100: the discount as a percentage of the discounted amount, i.e. the interest paid for the extra days."},{"name":"annualized_rate_simple_percent","label":"Annualized rate (simple)","type":"number","unit":"%","decimals":2,"description":"Cost for the period × 365 / days_of_credit_given_up: the nominal annual cost of trade credit."},{"name":"annualized_rate_effective_percent","label":"Annualized rate (effective)","type":"number","unit":"%","decimals":2,"description":"((1 + cost for the period)^(365 / days) − 1) × 100: the compounded annual cost."},{"name":"terms_text","label":"Terms","type":"string","decimals":4,"description":"The terms in standard notation, e.g. \"2/10 net 30\"."},{"name":"recommendation","label":"Recommendation","type":"string","decimals":4,"description":"Whether taking the discount beats the borrowing rate (or a general interpretation when no rate is given)."}],"input_schema":{"type":"object","properties":{"discount_percent":{"description":"Percentage taken off the invoice when paid within discount_days (the 2 in 2/10 net 30). Unit: %.","type":"number","minimum":0,"maximum":99,"default":2,"examples":[2],"x-unit":"%"},"discount_days":{"description":"Days from the invoice date during which the discount applies (the 10 in 2/10 net 30). Unit: days.","type":"integer","minimum":0,"maximum":365,"default":10,"examples":[10],"x-unit":"days"},"net_days":{"description":"Days until the full amount is due without discount (the 30 in 2/10 net 30); must exceed discount_days. Unit: days.","type":"integer","minimum":1,"maximum":730,"default":30,"examples":[30],"x-unit":"days"},"invoice_amount":{"description":"Gross invoice amount before the discount.","type":"number","maximum":1000000000000,"exclusiveMinimum":0,"default":1000,"examples":[1000]},"borrowing_rate_percent":{"description":"Annual rate at which you could borrow to pay early (e.g. a credit line APR); used only for the recommendation. Unit: %.","type":"number","minimum":0,"maximum":1000,"examples":[8],"x-unit":"%"}},"additionalProperties":false},"output_schema":{"type":"object","properties":{"discount_amount":{"description":"invoice_amount × discount_percent / 100.","type":"number"},"amount_if_paid_early":{"description":"invoice_amount − discount_amount.","type":"number"},"days_of_credit_given_up":{"description":"net_days − discount_days: how much earlier the cash leaves. Unit: days.","type":"integer","x-unit":"days"},"implicit_rate_for_period_percent":{"description":"discount / (1 − discount) × 100: the discount as a percentage of the discounted amount, i.e. the interest paid for the extra days. Unit: %.","type":"number","x-unit":"%"},"annualized_rate_simple_percent":{"description":"Cost for the period × 365 / days_of_credit_given_up: the nominal annual cost of trade credit. Unit: %.","type":"number","x-unit":"%"},"annualized_rate_effective_percent":{"description":"((1 + cost for the period)^(365 / days) − 1) × 100: the compounded annual cost. Unit: %.","type":"number","x-unit":"%"},"terms_text":{"description":"The terms in standard notation, e.g. \"2/10 net 30\".","type":"string"},"recommendation":{"description":"Whether taking the discount beats the borrowing rate (or a general interpretation when no rate is given).","type":"string"}}},"formula":"d = discount_percent / 100; discount_amount = invoice_amount × d; amount_if_paid_early = invoice_amount × (1 − d); days = net_days − discount_days; simple = d / (1 − d) × 365 / days × 100; effective = ((1 + d / (1 − d))^(365 / days) − 1) × 100","method":"Standard cost-of-trade-credit formula: paying on the net date instead of the discount date is a loan of the discounted amount for (net − discount) days at interest equal to the discount. The simple rate is comparable with a nominal borrowing APR; the effective rate assumes the gain is reinvested every period.","sources":[{"name":"Wikipedia – Discounts and allowances (cash discounts such as 2/10 net 30)","url":"https://en.wikipedia.org/wiki/Discounts_and_allowances","type":"reference","retrieved_at":"2026-09-24"},{"name":"Wikipedia – Net D (payment terms such as 2/10 net 30)","url":"https://en.wikipedia.org/wiki/Net_D","type":"reference","retrieved_at":"2026-09-24"},{"name":"Corporate Finance Institute – 2/10 Net 30: how trade credit works","url":"https://corporatefinanceinstitute.com/resources/accounting/2-10-net-30/","type":"reference","retrieved_at":"2026-09-24"}],"freshness":{"type":"static","max_age_seconds":null,"note":"Deterministic formula with fixed constants; results never go stale. Inputs supplied by the caller determine the output."},"examples":[{"name":"2/10 net 30 on a 1,000 invoice","inputs":{"discount_percent":2,"discount_days":10,"net_days":30,"invoice_amount":1000},"expected":{"discount_amount":20,"amount_if_paid_early":980,"days_of_credit_given_up":20,"implicit_rate_for_period_percent":2.04,"annualized_rate_simple_percent":37.24,"annualized_rate_effective_percent":44.59,"terms_text":"2/10 net 30"},"url":"https://tttkmbb.com/api/v1/calculate/early-payment-discount?discount_percent=2&discount_days=10&net_days=30&invoice_amount=1000"},{"name":"1/15 net 45 on 5,000 with an 8 % credit line","inputs":{"discount_percent":1,"discount_days":15,"net_days":45,"invoice_amount":5000,"borrowing_rate_percent":8},"expected":{"discount_amount":50,"amount_if_paid_early":4950,"days_of_credit_given_up":30,"annualized_rate_simple_percent":12.29,"annualized_rate_effective_percent":13.01,"terms_text":"1/15 net 45"},"url":"https://tttkmbb.com/api/v1/calculate/early-payment-discount?discount_percent=1&discount_days=15&net_days=45&invoice_amount=5000&borrowing_rate_percent=8"}],"faq":[{"q":"Why is 2 % worth 37 % per year?","a":"The 2 % is earned in only 20 days (day 10 to day 30). 2/98 = 2.04 % per 20 days, and there are 365/20 = 18.25 such periods in a year: 2.04 % × 18.25 ≈ 37.2 %."},{"q":"Which rate should I compare with my loan rate?","a":"Use the simple rate against a nominal APR on a short-term credit line, since the borrowed money is only needed for the 20 days; the effective rate shows the compounded equivalent for comparison with investment yields."},{"q":"What if the discount is 0 or the periods are equal?","a":"With no discount there is no cost of trade credit (rates are 0). net_days must exceed discount_days; equal periods would mean the discount is available until the due date, so there is nothing to give up."}],"tags":["early payment discount","2/10 net 30","cost of trade credit","cash discount","prompt payment discount","accounts payable"],"related":[{"calculator_id":"discount","reason":"Plain percentage discount on a price."},{"calculator_id":"apy","reason":"Convert a nominal annual rate into its effective yield."},{"calculator_id":"simple-interest","reason":"Interest for a short period at a simple rate."}],"links":{"html":"https://tttkmbb.com/finance/early-payment-discount","markdown":"https://tttkmbb.com/finance/early-payment-discount.md","json":"https://tttkmbb.com/finance/early-payment-discount.json","api":"https://tttkmbb.com/api/v1/calculate/early-payment-discount","schema":"https://tttkmbb.com/api/v1/calculators/early-payment-discount","openapi":"https://tttkmbb.com/openapi.json","mcp":"https://tttkmbb.com/mcp"},"version":"v1","updated_at":"2026-09-24"},"timestamp":"2026-09-24T03:46:42Z","next_actions":[{"tool":"run_calculator","calculator_id":"early-payment-discount","reason":"Run Early Payment Discount Calculator with the inputs above."}],"links":{"markdown":"https://tttkmbb.com/finance/early-payment-discount.md"}}