Define the delayed-payment scenario
total delay cost = invoice amount × entered annual funding rate × days late ÷ day-count basis + administration cost + entered delayed-capacity contribution
- invoice amount
- Amount used on the selected currency and tax basis (currency) — business record
- days late
- Difference between stated due or expected date and scenario receipt date (days) — business record or user scenario
- entered annual funding rate
- User-owned funding-cost assumption; not a market or statutory rate (annual percentage) — user scenario
- administration cost
- Explicit follow-up and collection administration cost (currency) — business record or user scenario
- entered delayed-capacity contribution
- User-entered opportunity-cost scenario, not a legal charge (currency) — user scenario
Use one positive day-count basis and state it. The tool owns the exact arithmetic; this guide interprets the result.
Decision checkpoints
- Confirm invoice amount, selected tax basis, contractual due date and realistic expected receipt date. (not complete)
- Move the receipt date in the cash schedule and locate the first buffer effect. (not complete)
- Enter the business’s funding rate and day basis; do not borrow a market or statutory rate. (not complete)
- Record administration and delayed-capacity cost separately so neither becomes a hidden fee. (not complete)
- Compare total delay cost with the affected customer or offer contribution on the same basis. (not complete)
- Test no change, deposit, milestone, shorter term, customer-specific condition and broad price change symmetrically. (not complete)
- Stop for disputed rights, enforceability, collection, credit or customer-treatment questions and obtain qualified advice. (not complete)
Work the exact tool fixture
One invoice, then one sensitivity
These engine-derived rows use generic currency units and user-entered assumptions. The 10% annual rate is not a market rate, legal rate or recommendation.
| Scenario | Days late | Entered capacity cost | Funding cost | Total cost | Share of invoice |
|---|---|---|---|---|---|
| Base fixture: 36,500 invoice, 10% annual rate, 365-day basis, 100 administration | 30 | 200 | 300 | 600 | 1.64% |
| Sensitivity: same invoice/rate/basis/admin, zero capacity cost | 45 | 0 | 450 | 550 | 1.51% |
Compare commercial responses without declaring a winner
| Response | Possible scenario effect | Trade-off to test | Stop point |
|---|---|---|---|
| No change | Preserves current commercial terms | Business retains measured delay exposure | Exposure exceeds the accepted contribution/cash boundary |
| Deposit or milestone | Moves part of cash earlier | Customer friction, administration and delivery obligations | Contract or consumer-law position is unclear |
| Shorter terms | Tests an earlier due date | Acceptance, relationship and operational follow-up | No evidence the term is commercially available |
| Customer-specific condition | Targets the measured exposure | Fairness, consistency, sales and legal review | Disputed rights or prohibited treatment |
| Broad price change | Spreads cost across the offer or portfolio | Competitive position and customers who do not create the delay | One invoice is the only evidence for the change |
Late-payment cost and pricing questions
- Should every late payment increase every customer price?
- No. Measure the attributable scenario first, then compare commercially available responses and their trade-offs. One customer’s delay does not automatically justify a universal price change.
- Is delayed-capacity contribution an accounting loss?
- Not necessarily. It is a user-entered opportunity-cost scenario and must stay labelled separately from funding and administration cost. Do not present it as a legal fee or realised loss.
- What funding rate should be used?
- Use a documented rate that matches the business’s decision and day basis. Margin101 supplies no provider, market or statutory rate and does not determine finance availability.
Methodology sources
- Margin101 Late Payment Cost methodology — Margin101: Exact formula, fixture, units and user-entered opportunity-cost boundary.
- Margin101 13-Week Cash-Flow Forecast methodology — Margin101: Dated receipt timing and buffer-gap interpretation.
- Margin101 Receivables Collection Impact methodology — Margin101: Aggregate collection-days scenario boundary.