What does the term '2/10, n/30' refer to in business transactions?

The term '2/10, n/30' refers to a common set of credit terms outlining the conditions for payment on invoices. It indicates that a buyer can receive a 2% discount on the invoice total if they pay within 10 days of the invoice date. If the buyer does not take advantage of the discount, the net amount of the invoice is due within 30 days. This payment structure encourages early payment from buyers, benefiting sellers by improving cash flow.

This terminology encapsulates both the incentive to pay early (the cash discount) and the standard payment period (net 30 days), making it an essential concept in managing business transactions effectively. Understanding these terms helps organizations make informed decisions regarding credit policies and cash management.