2/10 Net 30 is a payment term offering a 2% discount if the invoice is paid within 10 days, otherwise the full amount is due in 30 days. The annualized cost of not taking the discount is approximately 36% — almost always worth taking if you have the cash.
The notation '2/10 net 30' reads as: '2% discount if paid within 10 days; otherwise full amount due in net 30 days.' It is the most common early-payment-discount term in B2B commerce, but many buyers skip the math and just pay at day 30. The annualized cost of forgoing the discount: you're effectively paying 2% to borrow money for 20 days (days 11 to 30). Annualized: 2% × (365 / 20) = 36.5%. That's the rate you're implicitly paying for the extra 20 days of float. Almost any financing source — bank line of credit, SBA loan — is cheaper than 36.5% APR. So if you can pay within 10 days, take the discount. Conversely, from the seller's perspective: offering 2/10 net 30 accelerates cash collection but costs 2% of revenue. At scale that's significant — a business doing $5M in B2B sales offering 2/10 net 30 and having customers take it would cost $100K/year. The tradeoff is faster cash conversion and lower DSO. Whether that's worth it depends on the seller's cost of capital and receivables financing costs.
Yes, if your cost of capital is below the annualized discount rate. For 2/10 net 30, the annualized rate is ~36%. Any business with access to a line of credit at 6–15% APR should always take the discount — borrow on the line, pay early, capture the discount. Only skip if you're in a severe cash crunch with no credit access.
Same pattern: 1% discount if paid within 15 days, full amount due in 45 days. The annualized cost of not taking this discount: 1% × (365/30) ≈ 12.2%. Less compelling than 2/10 net 30, but still favorable compared to most commercial borrowing rates.
Taking early-payment discounts doesn't directly affect business credit scores like Paydex. Paydex measures whether you pay on time relative to stated terms — paying early scores the same as paying on the due date (both count as 'paid as agreed'). However, early payment does improve your DSO and cash conversion cycle, which lenders view favorably when analyzing cash flow.