Signal · Cash

Early-payment discount economics

Estimates the annualised return of negotiating a 2/10 net-30 style early-pay discount with suppliers you already pay early — often ~37% APR on your working capital.

Cash

What the signal measures

Estimates the annualised return of negotiating a 2/10 net-30 style early-pay discount with suppliers you already pay early — often ~37% APR on your working capital.

Why it matters

When a supplier offers "2/10 net 30" (2% discount if paid within 10 days, otherwise net 30), the annualised return on paying early is roughly 37% APR — enormous relative to any short-term savings account. Most owners either miss the offer or intuit "2% is small" and skip it. Compass computes the APR-equivalent so you can compare like-for-like with your other uses of cash.

How to act on it

If your cash position supports it, take the discount on the largest applicable bills — the £ savings compound over the year. If it does not, use the discount as leverage in your next terms negotiation. The drafted action is a supplier note either accepting the discount or opening the negotiation.

Worked example — fixture consultancy

On the fixture we simulate a discount conversation with the office rent supplier: at £500/mo, a 2% discount is £120/year for essentially zero effort — easy yes. On a £5k software subscription the number scales linearly and becomes a small but real line-item. Compass ranks by £ impact so the biggest levers surface first.