What does the term 2/10, N/30 refer to in business transactions?

The term 2/10, N/30 is a common notation in business transactions that outlines the payment terms between a buyer and a seller. Specifically, this term means that a buyer can receive a 2% discount on the invoice total if payment is made within 10 days. If the buyer does not take advantage of this discount, the full invoice amount is due in 30 days.

This structure encourages prompt payment by offering a financial incentive to settle the bill quickly. It reflects a common practice in commercial transactions to enhance cash flow for sellers while providing buyers an opportunity for savings. Understanding these terms is crucial for both parties involved in the transaction, as it affects their financial planning and relationships.