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Calculate the Annual Effective Rate of your Prompt Payment Discount

Say you have access to a discount by paying your supplier earlier, but you hesitate? No matter what is the reason, it is wise to calculate the annual rate to evaluate your opportunity cost.

A prompt payment discount or prompt-pay discount is an opportunity to invest in the company by injecting an amount prematurely in order to get a return: the discount. However, this investment could deprive other sectors. Annualizing the prompt-pay rate will help to compare its return with your cost of capital, which will tell you if it's more profitable to invest in the discount allowance than elsewhere in the business.

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Annualized discount rate

Numbers in our calculators are rounded to two decimals.
The same calculations made in an Excel spreadsheet may differ slightly.

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