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Early payment discount cost calculator

Compare an invoice discount with the simple annualized cost of waiting until the full payment day.

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Your result

Discount saved200
Early payment amount9,800
Simple annualized cost of foregoing discount37.24%

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How to calculate

Early payment discount costThe cost is measured against the discounted payment amount over the extra days of credit. Contract dates and cash availability still matter. Concept diagram; not to scale.Early payment discount cost1Invoice amount100002Early payment discount (%)23Discount saved200MyCalCute.com
The cost is measured against the discounted payment amount over the extra days of credit. Contract dates and cash availability still matter. Concept diagram; not to scale.

Compare an invoice discount with the simple annualized cost of waiting until the full payment day.

Discount saved = invoice*d/100
Early payment amount = invoice*(1-d/100)
Simple annualized cost of foregoing discount = d/(100-d)*365/(full-early)*100 %

Worked example

  • Invoice amount: 10000
  • Early payment discount (%): 2
  • Discount payment day: 10
  • Full payment day: 30
  • Discount saved: 200
  • Early payment amount: 9,800
  • Simple annualized cost of foregoing discount: 37.24 %

Assumptions and limits

Uses a 365-day simple annualization and one discount period. This is not a quoted APR, compounded return, tax result or financing recommendation.

Results are rounded for display; calculations use unrounded values. Read our calculation methodology.

Understanding the result

Compare an invoice discount with the simple annualized cost of waiting until the full payment day. The cost is measured against the discounted payment amount over the extra days of credit. Contract dates and cash availability still matter.

When this tool is useful

The cost is measured against the discounted payment amount over the extra days of credit. Contract dates and cash availability still matter.

Understanding your inputs

InputExample
Invoice amount invoice10000
Early payment discount (%) d2
Discount payment day early10
Full payment day full30

Frequently asked questions

What does this model leave out?

Uses a 365-day simple annualization and one discount period. This is not a quoted APR, compounded return, tax result or financing recommendation.

How do I reproduce the example?

Enter the displayed example values in their labelled units. Apply the formula before rounding; change one input at a time to compare scenarios.

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