Should You Pay Restaurant Suppliers Early for 2% Discount or Use Credit?
That 2/10 net 30 term from your supplier looks tempting—pay within 10 days and save 2%, or take the full 30 days. But is it worth draining your cash early? The math tells a clear story: a 2% discount for paying 20 days early translates to a 36% annual return. You'd need to be paying more than 36% interest on your credit line for it to make sense to skip the discount.
When to Take the Discount
If you have the cash sitting in your account earning minimal interest, always take the 2% discount. Even if you need to use a credit line at 8-12% interest to pay early, you're still ahead by a significant margin. The only time to skip it is when you're genuinely cash-strapped and need every dollar for payroll or rent in the next few days.
The Exception
If your supplier offers 1% for early payment, the math changes—that's an 18% annual return. Still decent, but now you need to weigh it against your actual cash needs and alternative uses for that money, like marketing or equipment repairs that could generate more immediate revenue.
Pro tip: Negotiate payment terms with your top 3 suppliers. Many will offer better discounts or extended terms to reliable customers who communicate proactively.
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