# SAP Payment Terms Cash Discount Calculator: Is 2/10 Net 30 Worth It? > Source: https://netray.co/tools/sap-payment-terms-cash-discount-calculator > Publisher: Netray (netray.co), AI and integration engineering for ERP and manufacturing systems. > Section: Free Tools ## Short answer Compare the early payment discount in your SAP payment terms with your cost of funds, and see the annualized return of paying early. ## Category sap ## Erp SAP S/4HANA ## Audience - AP manager - SAP FICO consultant - Treasury analyst ## Tool **Kind:** calculator **Currency:** $ **Inputs:** #### Invoice amount **Key:** invoice **Type:** number **Default:** 100000 **Min:** 0 **Step:** 1000 **Unit:** currency #### Cash discount **Key:** disc_pct **Type:** number **Default:** 2 **Min:** 0 **Max:** 20 **Step:** 0.25 **Unit:** % #### Discount period **Key:** disc_days **Type:** slider **Default:** 10 **Min:** 0 **Max:** 60 **Step:** 1 **Unit:** days #### Net payment period **Key:** net_days **Type:** slider **Default:** 30 **Min:** 1 **Max:** 120 **Step:** 1 **Unit:** days #### Cost of funds (annual) **Key:** cof **Type:** number **Default:** 9 **Min:** 0 **Step:** 0.25 **Unit:** % **Outputs:** #### Discount amount **Key:** disc_amt **Expr:** invoice * disc_pct / 100 **Format:** currency #### Payment if taken early **Key:** pay_early **Expr:** invoice - disc_amt **Format:** currency #### Days of financing given up **Key:** days_gained **Expr:** max(1, net_days - disc_days) **Format:** integer #### Annualized return (simple) **Key:** apr **Expr:** disc_pct / (100 - disc_pct) * 365 / days_gained * 100 **Format:** percent **Primary:** true #### Effective annual return (compounded) **Key:** eff **Expr:** (pow(1 + disc_pct / (100 - disc_pct), 365 / days_gained) - 1) * 100 **Format:** percent #### Funding cost of paying early **Key:** fund_cost **Expr:** pay_early * cof / 100 * days_gained / 365 **Format:** currency #### Net benefit of taking the discount **Key:** net_benefit **Expr:** disc_amt - fund_cost **Format:** currency **Primary:** true **Chart:** #### Annualized return vs net payment days **Type:** line **X:** net_days **From:** 15 **To:** 90 **Steps:** 40 **Series:** - apr **Disclaimer:** Uses a 365 day year and ignores tax effects and bank holidays. Check the actual days defined in the payment terms and how baseline date is set in your SAP system. ## Content **Intro:** Payment terms in SAP, such as a discount of 2 percent within 10 days and net 30, decide when the payment run proposes an invoice and how much discount is taken. This calculator turns those terms into an annual rate so you can decide whether paying early beats your cost of funds. **Sections:** #### How to use it **Body:** Enter the invoice amount, the discount percentage, the discount period and the net period from the payment terms. Add your cost of funds as an annual rate. The tool shows the discount amount, the simple and compounded annual return and the net benefit after funding cost. The chart varies the net days, which shows how stretching suppliers to a longer net period increases the value of the discount to you. **Bullets:** - Use the terms as stored in the vendor master or purchasing document - Include the baseline date logic when counting days - Use your marginal borrowing rate, not an average rate #### The formula **Body:** Simple annualized return = discount / (100 - discount) * 365 / (net days - discount days). For 2/10 net 30 it is about 37 percent. The compounded version is (1 + d / (1 - d))^(365 / days) - 1, which is higher, since the discount can be earned repeatedly. Net benefit is the discount minus the interest you would have earned or paid on the cash for the days you give up. In SAP the terms are maintained in the payment terms configuration (OBB8) and used by the payment program in F110. #### Reading the result **Body:** If the annualized return is well above your cost of funds, take the discount and make sure the payment run is scheduled to pay within the discount window. If it is close to your cost of funds, the benefit is marginal and operational risk, such as paying too early on a disputed invoice, may outweigh it. A positive net benefit means the discount more than covers the interest on the early cash. #### Common mistakes **Body:** Counting from the invoice date when the baseline date is goods receipt or posting date. Ignoring that payment run timing can miss the discount window by a day or two. Using the same cost of funds for every vendor. Taking discounts on invoices with quality disputes, which creates recovery work later. **Cta:** If you want discount capture and payment timing monitored across thousands of open invoices, Netray can build a read-only assistant over your SAP AP data. Reach out to scope it. **Faq:** #### What is the annual rate of 2/10 net 30? **Answer:** About 37 percent simple, or around 44 percent compounded, since you give up 20 days of financing for a 2 percent discount. That is far above most borrowing rates, so it is usually worth taking. #### Where are payment terms set in SAP? **Answer:** Payment terms are defined in configuration (transaction OBB8) and assigned in the vendor master and documents. They carry the discount percentages, days and baseline date rules that the payment run uses. #### Should I always take the discount? **Answer:** Not always. If your own cost of funds is high, cash is constrained, or the invoice is disputed, early payment may not pay off. Compare the annualized return with your cost of funds and consider the risk. #### How does it work for customers? **Answer:** The same arithmetic applies in reverse. If you offer a discount to customers, the annual rate is what it costs you to accelerate cash. Compare that with your financing options. ## Search terms cash discount calculator, 2/10 net 30 calculator, sap payment terms discount, annualized cost of early payment discount, sap OBB8 payment terms, skonto calculator, early payment discount return, sap vendor payment terms --- Talk to an engineer: https://netray.co/contact?intent=erp_ai | Machine catalog: https://netray.co/agent/catalog.json