Invoice Discount & Early Payment APR Calculator
ToolVyne Invoice Discount Calculator computes the annualized effective interest rate (APR) of trade credit terms such as 2/10 Net 30. It reveals whether paying early to capture a discount yields a higher return than your cost of capital or credit line.
Algorithmic Formulas & Methodology
Effective APR = [Discount % / (100 - Discount %)] * [365 / (Net Days - Discount Days)] * 100Net Payment = Invoice Amount * (1 - (Discount % / 100))How to use this tool
The Hidden Cost of Forgoing Trade Credit Discounts
When a supplier offers terms of "2/10 Net 30", they are granting a 2% discount if settled within 10 days, with the full balance due in 30 days. Forgoing the 2% discount to hold cash for an extra 20 days is mathematically equivalent to borrowing money at an annualized APR of 37.24%.
Frequently Asked Questions
Only if the company faces a critical liquidity shortage and cannot access bank credit lines at an APR lower than the effective discount rate.
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