The Prompt Payment Act Answer Book

Chapter 9

Discounts and Rebates

Vendors may offer discounts for early payment of invoices. Rather than borrowing money to finance operations, vendors are often willing to receive a smaller amount of money in exchange for being paid quickly. When vendors offer discounts, it is up to the government paying office to determine whether paying early is economically justified and whether the office can make the payment by the discount deadline.

109. What does the notation “.5/10 Net 30” mean?

This is how discounts are normally stated. In this example, it means, “If you pay this invoice within ten days, you may take a 0.5 percent discount. If you fail to pay within ten days, the entire (net) amount is due within 30 days.” The ten days is referred to ...