In this article
Talk to our experts- 2/10 Net 30
- 2/10 net 30 is a B2B payment term that lets the buyer deduct 2% from the invoice if it pays within 10 days, and otherwise requires the full amount within 30 days. The 2% is a cash discount for prompt payment, separate from any trade discount already built into the price.
Also called: 2% 10 net 30
How it works
2/10 net 30 is a payment term written on a B2B invoice: the buyer may deduct 2% if it pays within 10 days, and otherwise the full net amount is due within 30 days.
- 2: the discount, 2% of the invoice amount.
- 10: the discount period, the number of days the buyer has to pay and still take the discount.
- Net 30: the full amount is due within 30 days, the same as plain net 30 terms.
Compared to plain net 30, the only difference is the 2% the buyer can take for paying early.
The IRS describes this kind of discount as a cash discount: an amount the seller permits the buyer to deduct from the invoice price for prompt payment. The same notation works with other numbers, so 1/10 net 30 is 1% off within 10 days, with the full amount due in 30.
When the 10 days start
The terms set the start date. Two examples from primary sources:
- Federal contracts: FAR 52.232-8, Discounts for Prompt Payment, says time is computed from the date of the invoice. If the contractor has not dated the invoice, the date the designated billing office receives a proper invoice is used.
- ERP documents: in Microsoft Dynamics 365 Business Central, the document dates on sales and purchase documents, not their posting dates, are used to calculate due dates for payments.
This is general information, not legal or accounting advice.
What skipping the discount costs
A buyer that skips the discount keeps its cash 20 more days (day 10 to day 30) and pays 2% more for it. On a simple annual basis:
- Cost of the extra 20 days: 2 / 98 = 2.04%
- Periods in a year: 365 / 20 = 18.25
- Simple annual rate: 2.04% x 18.25 = 37.2%
Comparing that rate with the buyer's own cost of funds shows which choice costs less.
Example
A distributor ships $8,500 of stock to a contractor on June 1 and invoices it the same day on 2/10 net 30 terms.
- Pay early: paid by June 11, the contractor takes $8,500 x 0.02 = $170 off and pays $8,330.
- Pay on terms: paid by July 1, 30 days after the invoice date, the contractor pays the full $8,500.
- Pay late: anything still open after July 1 is past due.
On Shopify
Shopify B2B runs on the Basic, Grow, Advanced and Shopify Plus plans. Its payment terms include no payment terms, net 7, net 15, net 30, net 45, net 60 and net 90, due on fulfillment, and a fixed date. All terms start from the day the order is placed, and customers can pay any time after the order is placed up until the due date. After the terms expire, customers can still pay, but the order displays as Overdue in customer accounts.
In Business Central, payment terms determine how you manage due dates and payment discounts: when you post an invoice, it calculates the payment discount based on the payment terms, and the payment discount date is the last date that the customer can receive a discount.
How Uncap helps
Uncap's guide to B2B payment terms calls 2/10 net 30 an early payment incentive: the buyer gets a small discount for paying fast, and you get cash sooner. It works best when margins allow for the discount and the buyer has the liquidity to use it consistently. Uncap's guide to Shopify net terms covers the back office. Uncap Connect is built specifically for this: Shopify orders sync to your ERP automatically, including net terms orders with payment due dates and outstanding balances.
Sources
Frequently asked questions
What does it mean if an invoice has credit terms of 2/10 net 30?
It means the buyer may deduct 2% from the invoice if it pays within 10 days, and otherwise must pay the full amount within 30 days. On a $8,500 invoice, paying early costs $8,330 and paying on terms costs $8,500.
What is the discount period for credit terms of 2/10 net 30?
The discount period is 10 days. The terms set when it starts; in federal contracts under FAR 52.232-8, for example, time is computed from the date of the invoice.
What does 2% 10 net 30 mean?
2% 10 net 30 is another way of writing 2/10 net 30: 2% off for paying within 10 days, or the full net amount within 30 days. The 2% is a cash discount for prompt payment.
What does it cost to skip a 2/10 net 30 discount?
Skipping it means paying 2% more to keep the cash 20 more days. That works out to 2 / 98 x 365 / 20, or a simple annual rate of about 37.2%.
