Definition
2/10 NET 30 is shorthand for "2 percent discount if paid within 10 days, otherwise the net amount is due in 30 days." It's one of the most common trade-discount terms in US business.
Buyers who can afford to pay early often do, because the implicit interest rate is high. Forgoing a 2% discount to hold cash 20 extra days is equivalent to an annual interest cost of about 37% (2% × 365/20 = ~36.5%). Corporate treasurers usually take the discount when cash permits.
Variations work the same way: 1/10 NET 30, 2/15 NET 45, 3/10 NET 30. The first number is the discount percent, the second is the deadline in days to qualify for it.
For sellers, the tradeoff is faster cash flow vs. lower revenue. It works well for companies that are cash-constrained or that deal with slow-paying enterprise buyers. For growth-stage companies on healthy margins, it can be a cheap source of working capital relative to factoring or a line of credit.
Annualised cost of not taking the discount = (discount % / (100 − discount %)) × (365 / (NET days − discount days))Invoice of $10,000 at 2/10 NET 30: pay by day 10 for $9,800. Pay by day 30 for $10,000. Skipping the discount to hold $200 for 20 days ≈ 37% annualised cost.