Calculator Inputs
Example Data Table
| Vendor | Subtotal | Tax | Fees | Discount | Terms | Paid | Net Payable | Annualized rate |
|---|---|---|---|---|---|---|---|---|
| Northline Supplies | 100,000 | 16% | 2,500 | 2% on subtotal | 2/10 net 30 | Day 7 | 116,500 − 2,000 = 114,500 | ≈ 36.7% (360-day basis) |
Formula Used
- Tax amount = Subtotal × (Tax Rate ÷ 100)
- Gross total = Subtotal + Tax amount + Fees
- Discount base = Subtotal (or Gross total, if selected)
- Discount amount = Discount base × (Discount % ÷ 100)
- Net payable = Gross total − Discount amount (only if paid within discount window)
- Annualized rate (APR) = [d ÷ (1 − d)] × [Year Days ÷ (Net Due Days − Discount Days)] where d = Discount % as a decimal
How to Use This Calculator
- Enter the invoice subtotal, tax rate, and any additional fees.
- Set the early payment discount percent and where it applies.
- Provide invoice and payment dates, plus discount and net due days.
- Optionally enter your cost of funds to compare value.
- Click Calculate to see totals, discount eligibility, and APR.
- Use the download buttons to export the same results.
Discount Terms and Compliance
Early payment discounts convert contract language into measurable value. Start by confirming the discount base: many agreements apply the percentage to the goods or services subtotal, not to taxes or pass-through fees. This calculator separates subtotal, tax rate, and additional fees so the discount amount reflects the clause accurately. Using the same rounding rule as your ledger reduces reconciliation differences during invoice approval. It also highlights discount eligibility and net payable.
Timing Rules That Trigger Savings
Eligibility depends on timing, not intent. Enter the invoice date and the actual payment date, then set the discount window and the net due term. The tool computes the discount deadline and the due date, and flags whether the payment landed inside the window. If your policy treats weekends or bank holidays differently, record that exception in notes so the approval trail matches your payment process. Use consistent date formats to prevent misreads.
Annualized Rate for Decisioning
The annualized rate explains what you "earn" by paying early. It uses d/(1-d) x YearDays/(Net-Discount) to translate the one-time discount into an APR for comparison. For example, 2/10 net 30 produces about 36.7% on a 360-day basis, which is higher than short-term borrowing. Switching to a 365-day basis slightly changes the rate and keeps comparisons consistent across teams.
Contract Clauses and Approval Evidence
Strong documentation matters in contracts and audits. Capture vendor name, invoice number, and internal notes such as the clause reference, approver, and payment method. The CSV export supports evidence packs, while the PDF summary works well for email approvals or shared folders. When terms change, rerun the calculation and keep both versions to show why the payment decision was updated.
Supplier Negotiation and Portfolio Use
At scale, discounts become a portfolio decision. Use the savings, days saved, and savings-per-day fields to rank opportunities when cash is limited. Pair the annualized rate with your cost of funds to set a practical threshold for taking discounts. Over time, the data can support renegotiation-asking for larger discounts, longer windows, or dynamic terms based on payment performance and forecasted liquidity.
FAQs
1. What does "2/10 net 30" mean?
It means you receive a 2% discount if you pay within 10 days of the invoice date; otherwise the full amount is due in 30 days.
2. Should the discount apply to tax and fees?
Many agreements apply discounts to the subtotal only. If the contract explicitly includes tax or pass-through fees, select "total"; otherwise use "subtotal" for cleaner compliance.
3. How is the annualized rate calculated?
The tool converts the one-time discount into an APR using d/(1-d) multiplied by YearDays divided by (Net Due - Discount Days), where d is the discount as a decimal.
4. What if payment is after the discount deadline?
The calculator will mark the discount as not available and show net payable without the discount. You can still use the APR field to evaluate whether earlier payment would have been worthwhile.
5. How do I compare this to financing costs?
Compare the discount APR to your cost of funds or hurdle rate. If the discount APR is higher, paying early typically beats borrowing or keeping cash idle, subject to liquidity needs.
6. Can I use this for partial payments or multiple invoices?
Yes for planning, but treat results as approximations. For partials, compute each payment tranche separately and document the allocation method. For multiple invoices, run one calculation per invoice to preserve audit clarity.