Discount Lost Calculator
The Discount Lost calculator estimates the financial cost of not taking advantage of early payment discounts. It’s an essential tool for businesses to evaluate the true cost of delayed payments and make smarter cash flow decisions.
Cost of Lost Payment Discount Tool
Discount Lost Opportunity Formula
$$\text{Discount Lost (\%)} = \frac{\text{Discount \%}}{1 – \text{Discount \%}} \times \frac{360}{\text{Full Payment Due Days} – \text{Discount Period}}$$
Explanation:
This formula calculates the annualized cost of not taking a purchase discount. It helps determine if borrowing funds to take advantage of early payment terms is financially wiser than paying late.
When suppliers offer terms like 2/10, net 30, it means a 2% discount is available if payment is made within 10 days; otherwise, the full amount is due in 30 days. If the buyer does not pay early, the discount is lost — essentially a high implicit interest rate.
Example Variables:
- Terms: 2/10, net 30
- Discount %: 2%
- Discount Period: 10 days
- Full Payment Due: 30 days
Calculation:
- = (0.02 / (1 – 0.02)) × (360 / (30 – 10))
- = 0.02041 × 18 = 36.73% annualized cost
Use Cases:
- Accounts payable decision-making
- Cash flow and interest rate comparisons
- Financial performance improvement