What late payment actually costs you
Four numbers you already know, and you get the three that matter: how much of your cash is sitting in other people's accounts, what carrying that costs you over a year, and how many hours a month go into asking for it.
No account, no email wall. The calculator runs entirely in your browser — the figures you type never leave it.
Cash tied up
$17,398.36
Your money, earned and invoiced, sitting in someone else's account on an average day.
Carrying cost
$1,565.85/yr
What financing that balance costs you over a year at 9% — $21.75 per late invoice.
Chasing time
3 hrs/mo
36 hours a year spent asking for money you have already earned.
| Step | Arithmetic | Result |
|---|---|---|
| Late invoices a year | 6 a month × 12 months | 72 invoices |
| Value paid late each year | 72 invoices × $4,200 | $302,400 |
| Which is, per day | $302,400 ÷ 365 days | $828.49 a day |
| Cash tied up on an average day | $302,400 × 21 days ÷ 365 days | $17,398.36 |
| Annual carrying cost | $17,398.36 × 9% a year | $1,565.85 a year |
| Chases a month | 6 late invoices × 3 chases each | 18 chases |
| Hours a month chasing | 18 chases × 10 minutes ÷ 60 | 3 hours |
Why the cash figure is an average, not a total
$302,400 goes out late over a year, but it does not sit unpaid all at once. New invoices go late while older ones land. What your bank account actually feels is the balance that is outstanding at any given moment, which is the daily rate of late money multiplied by how long each dollar stays out — $828.49 a day, held 21 days.
The arithmetic, and what we assumed
- A year is 365 days. Not 360. Your cost of capital is quoted per year, and dividing it by anything other than the number of days in a year would overstate every answer on this page.
- Cash tied up is an average, not a total. It is the balance outstanding on a typical day, which is what a credit line has to cover.
- Money is rounded to the cent, once per line. Each step is computed as one exact multiplication and division and rounded at the end, so every row follows from the row above it and you can reproduce the whole thing on paper.
- Minutes per chase and chases per invoice are your assumptions. They are form fields, they are not research, and the hours figure is only as good as what you put in them.
- Default is not included. This is the cost of being paid late, not the cost of never being paid.
Questions people ask about the cost of late payment
- How do you work out what late payments cost a business?
- In two parts, because they are two different costs. The first is the money: invoices paid late mean a balance of your own cash sitting in someone else's account at any given moment, and whatever you are paying to cover that gap — a credit line, a card, or the return you gave up by not having the money — is the carrying cost. Take the value you invoice late over a year, spread it across 365 days, and multiply by how many days each dollar stays out; that gives the average balance outstanding. Multiply that balance by your annual rate and you have the yearly cost. The second part is time: the hours spent chasing are real hours that would otherwise be billable or spent on work that grows the business.
- What should I put in for cost of capital?
- The rate you actually pay to have money now rather than later. If you draw on a line of credit or a business card when cash is tight, use that rate — it is the most honest answer, because that is literally what the delay is costing you. If you never borrow, use what the money would earn sitting in a business savings or treasury account, because that return is what you are giving up. If you are turning down work or delaying a hire because the cash is not there, the real cost is higher than either, and this calculator will understate it.
- Why is the cash figure lower than everything I invoice late in a year?
- Because those are different quantities and only one of them is a number your bank account ever sees. Over a year you might invoice several hundred thousand dollars late, but it does not all sit unpaid simultaneously — new invoices go overdue while older ones get paid. What you actually have to cover is the balance outstanding on an average day, which is the daily rate of late money multiplied by how long each dollar stays out. That is the figure a lender would finance, so it is the figure to apply a rate to. Applying an annual interest rate to the yearly total would overstate the cost several times over.
- Where do the minutes-per-chase and chases-per-invoice numbers come from?
- From you. They are both form fields, they start at 10 minutes and 3 chases so the page has a worked example in it, and neither is a research finding — we are not going to quote you an industry average we cannot cite. Change them to what is true where you work. They are visible and editable rather than buried in the code precisely because the hours figure is only as good as the assumption behind it.
- Does this include invoices that never get paid at all?
- No, and deliberately. This measures the cost of delay, not the cost of default. An invoice written off as bad debt costs you the whole invoice, not the interest on it, and mixing the two produces a number so large it stops being useful. If you want the full picture, work out your write-offs separately and add them.
- What counts as a normal number of days late?
- We are not going to give you a benchmark we cannot point at a source for. What matters more than the industry figure is your own trend: whether the average days late this quarter is worse than last, and whether it is one or two customers dragging the number or all of them. Those you can measure from your own invoices, and they are the ones you can act on.
- Do I need an account to use this?
- No. There is no signup, no email wall and no trial. The calculation runs in the page you are on — the figures you type are not sent anywhere, because the calculator makes no server call at all. The email box further down the page is the one exception, and only if you choose to fill it in.
Collectly does this across every invoice, on its own
You just put a number on what waiting costs you. Collectly does the same thing continuously for every unpaid invoice you have — reads the replies, works out why each one is unpaid, estimates when it will land, and drafts the follow-up for you to approve.
With 15 rules it cannot talk its way around
- A paid or written-off invoice is never chased again. Follow-ups are switched off permanently, not deferred.
- A disputed invoice stops automated chasing entirely and goes to a person to resolve.
- A promise to pay on a date pauses reminders until that date has passed. Collectly checks back the day after, not on the day.
- At least three days between reminders on the same invoice, so re-running the analysis cannot turn into nagging. A resent or corrected invoice the customer has just asked for is not a reminder, and still waits for your approval.
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