# Oracle EBS AP Early Payment Discount Calculator > Source: https://netray.co/tools/oracle-ebs-ap-early-payment-discount-calculator > Publisher: Netray (netray.co), AI and integration engineering for ERP and manufacturing systems. > Section: Free Tools ## Short answer Check whether taking an early payment discount on supplier terms beats your cost of funds, per invoice and per year. ## Category oracle ## Erp Oracle E-Business Suite ## Audience - AP manager - Controller - Treasury analyst - EBS finance user ## Tool **Kind:** calculator **Currency:** $ **Inputs:** #### Invoice amount **Key:** invoice_amt **Type:** number **Default:** 25000 **Min:** 0 **Step:** 500 **Unit:** $ #### Discount percent **Key:** disc_pct **Type:** number **Default:** 2 **Min:** 0 **Max:** 50 **Step:** 0.1 **Unit:** % **Help:** Example: 2 for 2/10 net 30. #### Discount days **Key:** disc_days **Type:** number **Default:** 10 **Min:** 0 **Step:** 1 **Unit:** days #### Net due days **Key:** net_days **Type:** number **Default:** 30 **Min:** 1 **Step:** 1 **Unit:** days #### Cost of funds **Key:** cost_funds_pct **Type:** number **Default:** 8 **Min:** 0 **Max:** 60 **Step:** 0.5 **Unit:** % per year **Help:** Borrowing rate or the return on cash you would otherwise earn. #### Annual spend on these terms **Key:** annual_spend **Type:** number **Default:** 1200000 **Min:** 0 **Step:** 10000 **Unit:** $ **Outputs:** #### Discount per invoice **Key:** disc_amt **Expr:** invoice_amt * disc_pct / 100 **Format:** currency #### Annualized return of taking the discount **Key:** annualized **Expr:** disc_pct / (100 - disc_pct) * 365 / max(net_days - disc_days, 1) * 100 **Format:** percent **Primary:** true **Description:** Simple annualized rate, no compounding. #### Cost of paying early **Key:** finance_cost **Expr:** invoice_amt * (1 - disc_pct / 100) * cost_funds_pct / 100 * max(net_days - disc_days, 0) / 365 **Format:** currency #### Net gain per invoice **Key:** net_gain **Expr:** disc_amt - finance_cost **Format:** currency **Primary:** true #### Net gain per year at this spend **Key:** annual_gain **Expr:** annual_spend * net_gain / max(invoice_amt, 1) **Format:** currency **Chart:** #### Net gain per invoice vs cost of funds **Type:** line **X:** cost_funds_pct **From:** 0 **To:** 40 **Steps:** 21 **Series:** - net_gain **Disclaimer:** Simple interest approximation. Ignores tax, supplier relationship effects and whether the discount is taken before or after tax in your Payables setup. ## Content **Intro:** Payment terms such as 2/10 net 30 look small but are worth well over 30% a year. This calculator shows the true annualized return, the net gain after your cost of funds, and the value across your annual spend. **Sections:** #### How to use it **Body:** Enter the discount percent and the two day counts from the Payables payment term. In Oracle Payables these live on the term lines, where a discount percent and discount days sit alongside the due days. Add your cost of funds and the annual spend that actually carries those terms. The result tells you whether paying on day 10 beats waiting until day 30, and by how much per invoice and per year. **Bullets:** - Only count spend where the supplier really allows the discount. - Use your marginal borrowing rate, not an average rate. - Check how your payment batch selection honors discount dates. #### The formula **Body:** The annualized return is d / (1 - d) multiplied by 365 / (net days - discount days), where d is the discount as a fraction. For 2/10 net 30 that is 0.02 / 0.98 times 365 / 20, about 37%. The cost of paying early is the discounted amount times the cost of funds times the days accelerated over 365. Net gain is discount minus that financing cost. If annualized return exceeds your cost of funds, taking the discount wins. #### ERP notes and common mistakes **Body:** Savings are only realized if invoices are entered, approved and selected for payment inside the discount window. Invoices stuck on hold or in approval quietly lose the discount. A useful Payables report is discounts lost by supplier, which is what makes the annual gain figure above worth chasing. Another mistake is applying the discount to tax or freight when the supplier excludes them. **Bullets:** - Watch for payment terms where discount days run from the invoice date versus the receipt date. - Pay on the last discount day, not the first, to keep cash longer. - Review holds regularly so approved invoices are not missed. **Cta:** If you want a view of discounts taken and lost by supplier directly from your Payables data, we can build a private, read-only dashboard over your EBS tables. **Faq:** #### Is 2/10 net 30 really 37% a year? **Answer:** Using the simple formula, yes: 2 percent for paying 20 days earlier on a 98 percent balance annualizes to about 37 percent. That is far above most borrowing rates, so the discount is usually worth taking. #### When is not taking the discount reasonable? **Answer:** When cash is genuinely constrained and your marginal cost of funds exceeds the annualized return, or when invoices cannot be approved in time. Otherwise the discount normally beats a bank line. #### Does Oracle Payables calculate this automatically? **Answer:** Payables calculates discount amounts from the payment term and selects invoices for payment by discount date, but it does not compare the return to your cost of funds. Finance teams usually do that analysis separately. #### Should I compound the return? **Answer:** Compounding gives a higher effective annual rate and is used by some treasuries. This tool uses the simple form because it is the common convention and is conservative. ## Search terms 2/10 net 30 calculator, early payment discount calculator, oracle payables payment terms discount, oracle ebs ap payment terms, annualized return early payment discount, take discount or pay on due date, oracle payables discount terms --- Talk to an engineer: https://netray.co/contact?intent=erp_ai | Machine catalog: https://netray.co/agent/catalog.json