Early Payment Discounts

Early Payment Discounts (also known as cash discounts or prompt payment discounts) are financial incentives offered by suppliers to encourage customers to pay invoices before the standard due date. These arrangements create mutual value through improved cash flow for suppliers and cost savings for buyers.

Common early payment discount terms include:

• 2/10 Net 30: 2% discount if paid within 10 days, full amount due in 30 days
• 1/15 Net 45: 1% discount if paid within 15 days, full amount due in 45 days
• Dynamic discounting: Sliding scale based on payment timing

Procurement and finance systems with automated invoice processing can identify discount opportunities, calculate return on investment for early payments, and optimize payment timing to maximize discount capture while managing cash flow requirements.