Explanation of 2/10 Net 30 Payment Term
2/10 net 30 is a payment term that offers a 2% discount if the invoice is paid within 10 days. Otherwise, the full payment is due within 30 days. It provides an incentive for early payment while allowing a period for full payment. The key parties involved are the seller/payee and the buyer/payer.
Calculation of Discounted Payment Amount
To calculate the discounted payment amount within 10 days, multiply the invoice amount by 98% (100% – 2% discount). For example, if the invoice amount is $1,000, the discounted payment would be $980.
Illustrative Example of 2/10 Net 30 Payment Terms
- Invoice amount: $100,000
- Invoice date: 09/01/2022
- Invoice due date: 30 days (09/30/2022)
Paying within 10 days results in a 2% discount, making the payment $98,000. Paying after 10 days but before or on the due date means the full payment of $100,000 is due.
Alternative Invoice Payment Terms
There are other common invoice payment terms including:
- Net D | Net Days | Net Due
- Net Due on / upon Receipt
- Net 7, 10, 14, 15, 30, 60, 90, 180
Cash Discount Explanation
"2/10 net 30" represents a cash discount for prompt payment:
- "2" indicates the discount percentage
- "10" refers to the number of days to pay for the discount
- "n/30" signifies the full payment due within 30 days if the discount terms are not met
Pros of Offering Discounts
Offering discounts like 2/10 Net 30 can lead to improved cash flow and encourage customers to pay sooner, benefiting both parties.
Illustrative Example of Payment under 2/10 Net 30 Terms
For a $1,000 invoice with 2/10 net 30 terms, paying within 10 days results in a $20 discount, making the payment $980. Paying after 10 days means the full $1,000 is due within 30 days.