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Cost of past-due invoices

Money sitting in past-due invoices isn’t free. It costs you interest (or the credit line you lean on instead) and some of it never comes in.

Your numbers

Every default is an example, not an industry figure. Replace it with yours. Everything stays in your browser.

Total of invoices past their due date, from your A/R aging report.

Roughly how long these invoices have been (or will be) outstanding past due.

Use your line-of-credit or loan rate: what it costs to cover the gap.

Look at what you wrote off last year as a share of past-due A/R.

How we calculate it

  1. Carrying cost = past-due receivables × annual cost of money × days past due ÷ 365
  2. Expected write-off = past-due receivables × share never collected
  3. Total cost = carrying cost + expected write-off

Doesn’t include the office time spent chasing payments, so the real cost is a bit higher. 4.33 is the average number of weeks in a month (52 ÷ 12).

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