1. What is 1/10 Net 30?

1/10 Net 30 is a common payment term that offers a 1% discount if the invoice is paid within 10 days, otherwise the full amount is due in 30 days. It's used to encourage early payments from customers.

2. How Does the Calculator Work?

The calculator uses the following formula:

Where:

• Invoice Amount — Total amount of the invoice in dollars
• 0.01 — Represents the 1% discount rate

Explanation: If payment is made within 10 days, subtract the discount from the invoice amount. If paid after 10 days but within 30 days, the full amount is due.

3. Importance of Early Payment Discounts

Details: Early payment discounts improve cash flow, reduce accounts receivable days, and can strengthen supplier relationships. They represent an opportunity cost calculation between the discount value and the time value of money.

4. Using the Calculator

Tips: Enter the invoice amount in dollars and select whether payment will be made in 10 days (to get discount) or 30 days (full payment). The calculator will show the discount amount (if applicable) and the final amount due.

5. Frequently Asked Questions (FAQ)

Q1: Is 1/10 Net 30 a good deal?
A: It depends on your cost of capital. A 1% discount for paying 20 days early is equivalent to about an 18% annualized return.

Q2: What's the annualized return of taking 1/10 Net 30?
A: The annualized return is approximately 18.25% (calculated as (1 + 1/99)^(365/20) - 1).

Q3: Are there variations of this term?
A: Yes, common variations include 2/10 Net 30 (2% discount) or Net 15, Net 45, etc. for different payment periods.

Q4: Should I always take early payment discounts?
A: Only if your cost of capital is higher than the implied annualized return of the discount.

Q5: How is this recorded in accounting?
A: If taken, the discount is recorded as "purchase discount" (for buyer) or "sales discount" (for seller) and reduces the payable/receivable amount.