Certified Supply Chain Professional (CSCP) Practice Exam

What does the term "10% net 30" indicate?

1. A 10% discount if paid within 10 days

2. A 30% discount if paid within 30 days

3. No discount for early payment

4. A mandatory payment within 10 days

The correct answer is: A 10% discount if paid within 10 days

The term "10% net 30" indicates that a buyer is entitled to a 10% discount on the invoice amount if payment is made within 10 days. If the buyer does not take advantage of the discount, the full invoice amount is due within 30 days. This type of payment term encourages prompt payment by offering a financial incentive, which is commonly used in business transactions to improve cash flow and reduce the risk of late payments. In contrast, other terms do not accurately represent the specifics of this billing arrangement. For instance, a 30% discount within 30 days does not reflect the terms of "10% net 30," and stating that there is no discount or a mandatory payment within 10 days misrepresents how the terms function. The clarity that "10% net 30" provides in relation to early payment discounts is essential for both sellers and buyers in managing their financial obligations effectively.