Cash discount vs funding cost
Interactive engineering and procurement calculator. Instant client-side computation with no sign-up.
The offer
Verdict
Discount amount
2% of the order
Annualised yield on early payment
2% / 98% × 365 / 50 days
Cost of funding this payment
at 4%/yr for 50 days
Net saving vs paying at term
$1000 discount − $268.5 funding cost
Take the discount — pay early and keep $731.5.
The early payment yields 14.9% annualised, well above your 4% cost of capital. Paying in full at term would leave that money on the table.
Why the discount is usually worth it
A 2% discount for paying 50 days early is a 14.9% annualised return — far above what most companies earn on cash. The few cases where it isn't worth it are when cash is genuinely scarce, or when your cost of capital is unusually high. Use your real blended rate, not a number that flatters the decision.
Cash flow matters too: if paying early would break a more important commitment, the arithmetic is only part of the decision. This tool shows the financial picture; the treasurer has the final call.