QuotedPartAnswers · Updated 2026-10-30
Is offering 2/10 net 30 worth it for a machine shop?
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Offer 2/10 net 30 only when receiving cash sooner is worth the discount. It means a 2% discount for payment within 10 days, with the full balance due in 30. On a $10,000 invoice, you give up $200 to receive $9,800 twenty days earlier. That is a 37.24% simple annualized cost on the cash accelerated, so it is expensive if the only benefit is avoiding a much cheaper credit line.
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Work the invoice in dollars first
Assume a completed batch of 100 steel spacers sells for $100 each and costs the shop $8,000 in total. Before the payment discount, the job leaves $2,000, or 20% of sales, under that cost model. If the customer earns the discount, sales collected fall to $9,800 and the remaining job profit becomes $1,800. The $200 discount consumes 10% of the original profit dollars, even though it is only 2% of the invoice.
For a financing comparison, assume an available line charges 12% simple annual interest, with no incremental fees. Borrowing the same $9,800 for the same 20 days costs $9,800 × 0.12 × 20 / 365 = $64.44. The discount costs $135.56 more. The 12% rate is an example input, not a current lender quote, and credit availability cannot be assumed.
| Item | Calculation | Result |
|---|---|---|
| Discount given | $10,000 × 2% | $200.00 |
| Cash received on day 10 | $10,000 − $200 | $9,800.00 |
| Simple annualized discount cost | $200 / $9,800 × 365 / 20 | 37.24% |
| Illustrative credit-line interest | $9,800 × 12% × 20 / 365 | $64.44 |
| Job profit after discount | $9,800 − $8,000 | $1,800.00 |
Use the days the buyer actually accelerates
The annualized calculation is a comparison tool using a 365-day year and simple interest. It is not a lender's disclosed APR or a promise of repeated reinvestment. Change the invoice amount, discount and days saved to fit the transaction. For a discount fraction d, the comparable simple annualized rate is d / (1 − d) × 365 / days saved.
If the customer already pays on day 15, paying on day 10 buys only five days. If their realistic baseline is day 60, the same concession may accelerate cash by fifty days. Document that history rather than using the printed net date automatically. Also ask whether the buyer will take the discount while still paying late; a term that is never enforced can become a permanent price cut.
Decide what the cash will change
A discount can still be a deliberate choice when cash unlocks a profitable order, avoids a verified penalty or resolves a collection problem. Put that benefit in dollars beside the $200. Do not add vague claims about stronger relationships to a financing spreadsheet and treat them as measured savings.
Check alternatives at the same cash amount and time horizon: a material deposit, progress billing, a smaller discount, or a financing offer you can actually obtain. The Federal Reserve's March 2025 small-business financing discussion emphasizes comparing costs, repayment terms and fees. The example here makes that comparison without asserting any current market interest rate.
State the rule before the customer orders
Example wording: ‘2% discount on the parts subtotal if cleared funds are received within 10 calendar days of invoice date; otherwise the full invoice is due within 30 calendar days. Freight and tax are excluded from the discount base. Discount applies only to invoices paid in full within the stated period.’ Confirm that this matches the accepted PO and your accounting process.
Before offering it across all accounts, calculate one actual customer's last several invoices using their payment dates and your financing quote. Record discount dollars beside days accelerated. Continue the offer only if those measured benefits justify the margin you surrendered, and resolve unauthorized deductions promptly through your ordinary invoice process.
Sources and limits
Claims are dated where they can change. Product calculations are examples from the stated inputs, not a promise about a customer's quote. Competitor wording is attributed to the source shown.
- Federal Reserve, March 2025: financing offers should be compared for costs, fees and repayment terms. — source (checked 2026-10-30)
- Invoice value, job cost, payment dates and 12% borrowing rate are assumptions. The annualized result uses simple interest and is not a quoted APR.
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