Net Terms Cost Calculator
See what offering net-30/60/90 terms actually costs you per invoice and per year — so you can price it in before saying yes to that big customer.
Written by Dorothy Ibrahim, 10+ years in banking & finance
Loading calculator…
How we calculate this
When you let a customer pay in 30, 60, or 90 days, you are lending them the invoice amount interest-free — and financing that loan at your own cost of capital. This calculator prices that: the carrying cost of a single invoice, the annualized cost at your monthly volume, and the implied APR of an early-pay discount like 2/10, which works both directions — what offering one costs you, and what taking a vendor’s earns you.
The formulas
- Carrying cost of one invoice
- invoice amount × your cost of capital × (terms days ÷ 365)Your cost of capital is your line-of-credit rate or the return the cash could earn elsewhere.
- Annualized cost at volume
- monthly sales volume at these terms × 12 × cost of capital × (terms days ÷ 365)Shown only when you enter a monthly volume.
- Cost of offering an early-pay discount
- invoice amount × discount percentage
- Implied APR of the early-pay discount
- (discount ÷ (1 − discount)) × (365 ÷ (terms days − discount days))The standard cost-of-trade-credit formula. Undefined when the discount window is not shorter than the terms. The rate is symmetric: paying it to get cash sooner, or earning it by taking a vendor’s discount.
Worked example
- Say you invoice a customer $20,000 on net-60 terms, your cost of capital is 12%, and you are weighing a 2/10 early-pay discount (2% off if paid within 10 days).
- Carrying cost = $20,000 × 0.12 × (60 ÷ 365) ≈ $394.52 — what waiting the full 60 days costs you in financing.
- Offering the 2% discount would cost $20,000 × 0.02 = $400 to receive the cash 50 days sooner.
- The implied APR of that discount = (0.02 ÷ 0.98) × (365 ÷ (60 − 10)) ≈ 14.9% per year.
- At 14.9% versus your 12% cost of capital, the discount costs slightly more than carrying the receivable — a close call. On the classic 2/10 net 30, the same formula gives about 37.2%, which is why taking a vendor’s 2/10 net 30 discount is almost always worthwhile if the cash is there.
Rates, benchmarks & sources
- Implied APR of an early-pay discount: (discount ÷ (1 − discount)) × (365 ÷ (terms − discount days)) — the textbook annualization of trade-credit terms. — Standard cost-of-trade-credit formula
- The cost-of-capital input is yours to supply — a line-of-credit rate or opportunity cost. The tool applies whatever rate you enter; it does not assume one. — Your own financing terms
Figures current as of 2026-07-02. See our methodology & editorial standards for how constants are versioned and verified.
What this tool doesn’t model
- It prices the cost of the terms as written; it does not model customers paying late beyond those terms — real DSO is often worse than stated terms, which makes the true cost higher. The AR Aging tool measures that gap.
- It ignores default risk: a receivable that never collects costs far more than its carrying cost, and longer terms generally carry more of that risk.
- The implied-APR comparison assumes you could actually deploy the early cash at your stated cost of capital — if the cash would sit idle, the effective benefit of collecting sooner is smaller.
- It does not weigh the commercial side of the decision: winning or keeping a large customer may justify terms that look expensive in isolation. The tool prices the terms so you can make that trade-off deliberately.
Frequently asked questions
What does "2/10 net 30" actually mean?
It is shorthand for a discount offer on an invoice: the buyer may take 2% off if they pay within 10 days, otherwise the full amount is due in 30. The first number is the discount percentage, the second is the discount window in days, and the "net" figure is the full payment deadline.
Why is the implied APR of a small discount so high?
Because the discount buys only a short acceleration. On 2/10 net 30, giving up 2% moves the payment just 20 days sooner — and annualizing a 2% cost over 20-day periods compounds to roughly 37% per year by the standard formula. The shorter the window between the discount date and the due date, the more extreme the annualized rate.
What number should I use for my cost of capital?
The rate you actually pay or forgo when cash is tied up. If you draw on a line of credit while waiting on receivables, use that rate. If you are self-funded, use your opportunity cost — what the cash would earn in the business or elsewhere. The verdict on offering a discount flips depending on this input, which is why the tool asks rather than assumes.
Should I take my vendor’s early-pay discount?
The arithmetic usually favors it: the implied APR of a typical discount (about 37% annualized on 2/10 net 30, by the standard formula) is far above most small-business borrowing rates, so paying early is like earning that rate on the cash. The exception is when paying early would strain your own cash position — a discount is never worth a missed payroll. This is education, not advice: check the numbers against your own rates and runway.
Does extending net-60 to a big customer really cost that much?
Per invoice it looks small — about $395 on a $20,000 invoice at a 12% cost of capital. The number that matters is the annualized cost at volume: the same terms applied to every month of sales compound into a real line item. That is the figure worth pricing into your rates or offsetting with deposits before agreeing to longer terms.
Related calculators
themoneysheet provides educational estimates, not financial, tax, or legal advice. Figures use published rates and formulas current as of the date shown, but your situation may differ. Consult a qualified professional (CPA, attorney, or licensed advisor) before making financial decisions.