Customer Early-Payment Discounts (Offering 2/10 Net 30)

How to read 2/10 net 30

'2/10 net 30' means: take 2% off if you pay within 10 days; otherwise the full amount is due in 30 days. From the customer's perspective, that 2% discount over 20 extra days of float is roughly 36% APR — almost any customer with a business line of credit at less than 36% APR should take the discount.

From your perspective as the seller, you're effectively borrowing the money for 20 days at 36% annualized. That's expensive financing, but predictable and doesn't appear on a balance sheet as debt.

When it's worth offering

Offering early-pay discounts makes sense when DSO is significantly above terms (e.g., net 30 customers actually paying in 50+ days), when the cash freed up will earn more than 36% (e.g., funding inventory in a high-margin business), or when factoring/MCA is your alternative — both of which cost more.

Offering it when DSO is already healthy is a margin giveaway. Audit acceptance rates: if 80% of customers take the discount, you've effectively just cut prices 2% across the board with no DSO benefit.

Pricing the discount correctly

The classic 2/10 net 30 (2% off if paid within 10 days, otherwise full payment in 30) translates to about 36% APR — you're effectively borrowing for 20 days at a 2% rate. That is genuinely expensive money to offer, but it can be cheaper than a line of credit for businesses that are working-capital constrained.

Discounts only work if customers actually take them. Large corporate AP departments often have systems that automatically take any offered early-pay discount; small business customers rarely will. Before instituting an early-pay discount program, model take-up rates honestly — if you expect 30% take-up but get 80%, you've quietly given away meaningful margin.

An alternative is dynamic discounting through a treasury platform: the customer chooses to accept payment early at a discount that scales with how early they pay. This pushes the financing decision onto the customer and tends to attract a different kind of buyer — one with cash and a desire for yield. For very large customers, dynamic discounting platforms (C2FO, Taulia) are increasingly common.

Make the discount a one-time test before institutionalizing it. Run a 90-day pilot with a subset of customers, measure actual take-up, and calculate the all-in yield (cash accelerated × cost of capital saved minus discount paid). Many businesses discover the program either doesn't move customer behavior or attracts the wrong customers; better to learn that on a pilot than after rolling it out everywhere.