Term: 1%/10 Net 30
Type: Trade credit/payment term
Used in: Invoicing, accounts payable, cash flow management
Also Known As: Early payment discount terms

Definition

1%/10 Net 30 is a common business payment term that means the buyer receives a 1% discount if they pay the invoice within 10 days. Otherwise, the full invoice amount is due in 30 days.

This encourages customers to pay early, helping sellers improve cash flow and reduce the risk of late payments.

The notation breaks down like this:
– 1% = discount offered
– 10 = days to get the discount
– Net 30 = full amount due within 30 days (if no discount taken)

Key Features

• Offers a small cash discount for early payment
• Helps vendors accelerate receivables
• Buyers save money by paying quickly
• Common in B2B invoicing

Common Use Cases

• Encouraging faster payments in accounts receivable
• Invoicing between wholesalers, manufacturers, and distributors
• Used in contracts to define payment expectations
• Managing cash flow on both sides of a transaction

Benefits or Advantages

• Boosts seller liquidity
• Lowers buyer’s effective purchase cost
• Improves vendor-client relationships
• Helps forecast short-term cash inflow

Examples or Notable Applications

– A $1,000 invoice with 1%/10 Net 30:
  • Pay $990 if settled within 10 days
  • Pay $1,000 if paid between day 11 and day 30
– Used in construction, retail supply chains, and business services
– Discount can translate to a very high annualized return for the buyer

External Links

• Investopedia: 1%/10 Net 30
• QuickBooks: Understanding Payment Terms
• FreshBooks: Invoice Payment Terms Guide

This post is for informational purposes only and does not constitute financial or legal advice.