An early payment rebate (also called early payment discount) is a small percentage discount offered by a supplier if the buyer pays before the standard invoice due date - typically expressed as 2/10 net 30 or similar.
The mechanics
A supplier offers, for example, 2% off the invoice if paid within 10 days rather than the standard 30. On an annualized basis this is a very high implicit return for the buyer - worth taking whenever working capital allows.
Modern dynamic discounting
Dynamic discounting extends this into a sliding scale where the discount adjusts based on how early payment occurs. Supply chain finance platforms have made this a standard working capital tool for buyers with strong cash positions.
