What Does Terms 2/10 Net 30 Mean in Accounting?
Every business desires to have a better relation with their vendors as well as other people associated with them. The proper payment of the invoices before the due date helps in keeping all vendors happy. It also ensures that the business is managing their accounts receivables properly and building a better trust. Credit terms impacts the contract negotiations and overall business to a great extent. If you are running a business in the USA then you need to know that 2/15 Net 30 is one of the popular credit terms here.
What is 2/15 Net 30 Meaning in Accounting?
This is the credit offered by the buyer to the seller during the purchase. Here, if the amount needs to be paid in 30 days and the buyer pays it within 10 days, instead of waiting for 30 days then they get a discount of around 2% of the amount.
When does the Net 30 Start?
One of the common confusion about 2/15 Net 30 is when does it actually start. Is it when goods and services are delivered? Is it after the 30 days when sale is agreed? Or 30 days after the invoice is delivered?
Well, the correct answer for this is that net 30 period begins when the invoice is delivered to the customer as per the date of invoice. It is always good to discuss the 30 days period with the customer priorly.
How is the Calculation Done Here?
If you have understood 2/15 Net 30 Meaning then you must know the proper calculation done.
Here , we present a proper guide about the 2/15 Net 30 proper calculation:
- Do a proper calculation about the amount in the total receivables to calculate the discount amount to be given.
- If the payment is done within 10 days by the purchaser then use the formula given below for the calculation:
Discount = Total amount of receivables * Percentage of discount [2%].
- If the amount is received in 10 days then final amount will be Total amount receivables which was calculated in Step 1 minus Discount amount calculated in Step 2:
2/10 Net 30 Amount = Total Receivables – Total Discount
Example:
The below example will give a better understanding about the 2/15 Net 30 calculation:
Invoice full amount: $1000
Invoice date: October 1
Invoice due date: 30 days
Payment terms: 2/10 net 30
Discount period: 10 days
Begin counting the days from the day after the invoice date.
The quick formula is 100% -discount % x invoice amount
100%-2%= 98%
$1,000 – $2 = $980
What are the benefits of 2/15 Net 30?
Some of the important benefits are listed below:
– Ensuring a faster payment process.
– Builds a better trust between business and their customers.
– Reduces the delayed payments.
– Improves the finances of the business nicely.
If you have understood the 2/15 Net 30 Meaning then it will be clear that it is very essential for the business. It has helped many businesses in the USA to recover the delayed payables nicely.
If you are unable to recover delayed payments and are experiencing problems in receivables then you can outsource it to experts. Meru Accounting is a better choice for you to outsource this task. They have good experience of working with many US businesses and improve receivables using 2/15 Net 30. They can manage all aspects properly. Meru Accounting is a popular accounting service providing agency around the world.
