Your question regards ?prompt payment discounts,? which are commonly
used in industry and result in phenomenal returns. The format of
prompt payment discounts is generally:
Percentage discount / if paid within x days of invoice, OTHERWISE net in x days
So, your 2/10, net 30 is:
2% discount if paid in 10 days, otherwise due in 30 days
There?s a detailed discussion of ?how expensive? this is in trade
financing and specifics on its calculation in Slide 19 of this
presentation. (Note that Pamela Hall uses a 365-day year in the
calculation ? and you?re using a 360-day year ? so results are
University of Toledo
?The Management of Working Capital? (Hall)
You?re getting a 2% discount on a 20-day advance in payments.
There are 18 20-day periods in a year.
Your discount is 18 x 2% = 36% per year.
In reality, prompt payment discounts are used to encourage businesses
(and governments) to pay early -- and not let the NET30 terms slip to
actual payments in 45 or 50 or 60 days. They are particularly
effective with traditional "slow pay" customers such as government
agencies and school districts.
Google search strategy:
?prompt payment discount? 2%/10 net 30