2 min read
Definition
An early settlement discount (or prompt-payment discount) is a small reduction a seller offers for paying an invoice early — for example 2% off for paying within 10 days instead of 30. It accelerates cash in, at the cost of a slightly lower amount received.
In plain terms
Offering '2/10 net 30' means a customer can take 2% off by paying in 10 days. It pulls cash forward, which can be worth it when cash is tight — though giving away margin to every customer adds up.
Why it matters
Weigh the cash brought forward against the margin given up. See prompt-payment discount and early payment discount.
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