Early-payment discount ESTIMATE
The dollars you save by paying inside the discount window, and the rough annual cost of waiting.
Result ESTIMATE
2/10, net 30 is a pair of dates
A $1,000 invoice with a 2% discount is $20 off, so the early payment is $980. The approximate annual cost of skipping the discount is (discount ÷ amount you would pay early) × (365 ÷ days you gain by waiting). Here that is (2 ÷ 98) × (365 ÷ 20), about 37.2%. The 20 days are the gap between day 10 and day 30. This is a cash-management shortcut used in textbooks. It is not an interest rate a bank published, and it is not a tax figure.
It is also not the late fee calculator. A late fee is what the seller adds after the due date. A cash discount is what the seller subtracts when you pay sooner. Record the purchase at the amount you actually expect to pay, and take the discount to a purchase-discounts account or to a reduction of the cost if that is your policy. Do not leave the $20 inside “miscellaneous.”
When the shortcut misleads
If the full due date is not after the discount date, there is no waiting period and the annualized figure is blank. A discount you cannot take because of a dispute is not a 37% loan. And paying early with money you needed for payroll can be the expensive choice even when the percentage looks large. Compare it with runway before you empty the operating account to chase every discount.