I'm trying to calculate the cost of waiting 30 extra days to receive money from a customer. Here's the situation:

How much would this cost a company per year if a customer pays us in 60 days vs. 30 days. Assume $500,000 in sales per year. Our return is 3.6%.

I am not trying to factor the receivables. I am just trying to calculate how much it costs to wait to get our money 30 days later. I have my own calculations, but I just want to verify them with someone else's or with stuff I can find online. Here are my calculations below:

(60-30) ÷ 365 * $500,000 * .036 = $1,479


This looks correct to me, for simple interest. If you are dealing with compound interest, the formula would be:

A = P(1+r/n)^nt

So, A = 500000(1+0.036/365)^(30), or 501,481.57, or an interest of 1481.57, assuming the 3.6% is the annual nominal interest rate and it is compounded daily.

Note that you are ignoring the depreciation and also ignoring the percentage of customers who will forfeit their debt in the 30 - 60 day period.


The cost of an extra 30 days is $1459.80

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