Calculate Payment Terms & Savings
Common Payment Terms Comparison ($50K Invoice)
| Terms | Pay Day | Amount Paid | Discount | Annualized Cost |
|---|
Early payment saves money but uses cash.
Supplier Payment Terms Calculator 2025: Net 30, 2/10 Net 30 — Save or Stretch Cash Flow?
Should you pay early for a discount or hold cash longer? Our supplier payment terms calculator shows savings, cash flow impact, and annualized cost of discounts in 2025.
With high interest rates and supply chain risks, optimizing terms is critical.
Common Terms Explained
- Net 30: Pay in 30 days
- 2/10 Net 30: 2% discount if paid in 10 days, else full in 30
- 1/15 Net 45: 1% off if paid in 15 days
- COD: Cash on delivery
Discount Formula
Discount = Invoice × Discount %
Amount Due Early = Invoice × (1 – Discount %)
Annualized Cost of Discount
Cost % = (Discount % ÷ (100 – Discount %)) × (360 ÷ (Net Days – Discount Days)) × 100
Why Terms Matter in 2025
Inflation, freight costs, and dynamic discounting make every day count.
How to Use the Calculator
- Enter invoice amount
- Input discount % and days
- Add net days
- Include annual purchases and cost of capital
- Click “Calculate” — see savings, DPO, break-even
Real-World Examples
Example 1: 2/10 Net 30
Invoice: $100K
Pay in 10 days: $98K → Save $2K
Annualized cost: 36.7% — take if your capital cost < 36.7%
Example 2: 1/15 Net 45
Invoice: $50K
Pay in 15 days: $49.5K → Save $500
Annualized: 12.2% — strong incentive
Days Payable Outstanding (DPO)
DPO = (Avg Payables × 365) ÷ COGS
Longer DPO = better cash flow
Should You Take the Discount?
| Annualized Cost | Action |
|---|---|
| >20% | Take discount |
| 10–20% | Compare to borrowing rate |
| <10% | Delay payment |
2025 Trends
- Dynamic Discounting: Sliding scale
- Supply Chain Finance: Banks pay early
- AI Negotiation: Auto-optimize terms
- ESG Terms: Bonuses for green suppliers
Improve Cash Flow
- Negotiate longer net terms
- Bundle invoices
- Use working capital tools
- Link to cash flow
Risks of Late Payment
- Damaged supplier relations
- Supply cutoff
- Price increases
Integrate with Other Tools
- COGS: For DPO
- Inventory Turnover: Align with DPO
- Business Loan: Cost of capital
Common Mistakes
- Ignoring annualized cost
- Not scaling to annual purchases
- Forgetting freight in invoice
- Using wrong COGS for DPO
Conclusion: Terms Are a Loan
Suppliers give interest-free loans via net terms. Use the payment terms calculator to decide: take the discount or keep the cash?
In 2025, smart terms = competitive edge.
Not legal or financial advice. Consult a CFO.
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