What does the term '2%/10 net 30' indicate in invoicing?

The term '2%/10 net 30' indicates that a vendor offers a 2% discount on the total invoice amount if the payment is made within 10 days of the invoice date. This is a common invoicing practice that encourages prompt payment from customers. If the buyer does not take advantage of the discount, the full amount of the invoice is due within 30 days from the invoice date.

Understanding this terminology is important for managing cash flow and optimizing working capital. By recognizing the potential cost savings involved with early payment, businesses can make more informed financial decisions.