Early Payment Discount Capture Rate
Percentage of available early-payment discounts from suppliers that are successfully taken
What is Early Payment Discount Capture Rate?
Early payment discount capture rate is the percentage of available supplier discounts for paying early that a business actually takes. It shows how well the finance team uses discounts that suppliers offer.
An early payment discount can deliver a very high annualised return compared with other uses of cash, so missing them can be expensive.
How this KPI is measured
- Function
- Finance
- Sub-function
- Accounts Payable
- Industry
- All Industries
- Type
- Lagging
- Impact
- Efficiency
- Unit
- %
- Measurement frequency
- Monthly / Quarterly
- Formula
- (Discounts captured / Discounts available) × 100
How to calculate it
Divide discounts captured by discounts available, and multiply by 100.
For example, if 80,000 of discounts were available and 60,000 were captured, the rate is 75%.
Before chasing every discount, compare the discount with your cost of funds. A 2% discount for paying 20 days early is worth much more than most borrowing costs.
Where it is used
Improving returns on cash
Earn savings by paying early.
Managing payment timing
Prioritise invoices with discounts.
Negotiating terms
Use data with suppliers.
How to improve it
Tips and common mistakes
- Take a discount only if it beats your cost of cash.
- Do not pay early where terms are already very short.
- Track missed discounts and the reasons.
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