What Is "2/10, Net 30" Payment Terms?

What Is "2/10, Net 30" Payment Terms?

What Is "2/10, Net 30" Payment Terms?

According to BusinessDictionary, the payment term 2/10, net 30 means that a two percent discount is given if the invoice is paid within 10 days. Regardless, the full balance is due 30 days after the date of the invoice.

Companies offer this discount to receive quicker payments. According to AccountingCoach, many companies say that the two-percent boon for early payment provides too steep a discount to the buyer. Paying the bill 20 days early is the equivalent to receiving a 36-percent annual interest rate on the purchase. AccountingCoach says that certain sellers will not offer a 2/10, net 30 payment term due to the high percentage equivalents.