Define the concession and the expected return
A request for longer terms is a trade: the customer holds the cash for longer, while the business accepts a later bank date. Write down what is expected in return—such as a specific order, contract scope or renewal decision—and label whether that benefit is observed, committed or only assumed.
Test terms before they enter a contract
Prerequisites, sequence and checkpoints
- Confirm the current and proposed invoice and receipt dates on one calendar basis. (not complete)
- Enter the amount delayed, extra days and your own applicable annual funding assumption. (not complete)
- Keep cash timing separate from revenue and contribution. (not complete)
- Compare shorter, base and longer-term scenarios with the same invoice amount. (not complete)
- Record the review trigger, relationship constraint and next dated cash check. (not complete)
Compare terms on one invoice basis
| Scenario | Receipt timing | Decision checkpoint |
|---|---|---|
| Shorter | Earlier than current terms | Check whether the customer can accept the change |
| Base | Current expected receipt date | Reference cash timing |
| Longer | Extra days before receipt | Compare funding burden with supported benefit |
Work all three terms on the same invoice
| Terms case | Receipt day | Timing burden from day 30 | Commercial-benefit evidence |
|---|---|---|---|
| Shorter | Day 15 | -49.32 CU relative to day 30 | No extra benefit assumed |
| Base | Day 30 | 0.00 CU reference | Current agreed scope |
| Longer | Day 60 | +98.63 CU relative to day 30 | 120 CU incremental contribution, user scenario |
On this narrow scenario, the labelled 120 CU incremental contribution exceeds the 98.63 CU timing burden by 21.37 CU. That is not an automatic approval: collection uncertainty, operating constraints, contribution definition and the dated cash low point still need review. If the benefit falls to 80 CU, it no longer covers this stated timing burden.
Estimate a timing burden without using a benchmark
Reproducible user scenario
Fictional 10,000 CU invoice, tax-excluded; the 12% annual assumption is supplied by the scenario user.
| Step | Input or arithmetic | Decision meaning |
|---|---|---|
| Timing change | 60 days - 30 days = 30 additional days | Cash arrives later; booked revenue is unchanged |
| User-scenario burden | 10,000 CU x 12% x 30 / 365 = 98.63 CU | Funding-time estimate only |
| Commercial test | Compare 98.63 CU plus operating constraints with evidenced incremental contribution | No demand or renewal promise |
Mistakes that make the comparison asymmetric
- Comparing invoice due dates while ignoring the expected bank-receipt date.
- Using revenue or order value as the commercial benefit instead of incremental contribution on the declared boundary.
- Changing the invoice amount, tax basis or funding assumption between terms cases.
- Treating the timing estimate as a legal late fee, accounting charge or collection instruction.
Limitations, evidence and next action
Use the calculation owner for the next step
- Late Payment Cost Planner
Measure the cost created by one late customer payment
- 13-Week Cash Flow Forecast
Forecast weekly closing cash, the first shortfall and the funding gap across a 13-week operating horizon
Questions and boundaries
- Is 12% a recommended funding rate?
- No. It is an illustrative user-entered assumption and must be replaced with the business scenario.
- Does a timing cost reduce accounting profit?
- Not automatically. Cash timing and the relevant profit treatment must be assessed separately.
Sources and scope
- Protecting cash flow and working capital — British Business Bank: Stable cash-flow and working-capital context only; no finance product or solvency conclusion.