What your payment terms actually cost
Enter what you invoice each month, the terms you offer, and how long clients really take. See the cash sitting in receivables at each, what late payment adds on top, and what it costs you a year to finance it.
What you bill on net terms in a typical month.
Stated terms
Your DSO, or average days to pay on paid invoices. Not sure? Terms + 15 is realistic.
Your line of credit rate, factoring rate annualized, or required return.
Computed in your browser. Nothing you enter is stored or sent.
Cash sitting in receivables today
$375,000
$8,333 a day × 45 actual days to pay
At net 30, if paid on time
$250,000
What your stated terms alone tie up
Extra from late payment
$125,000
15 days past terms × $8,333
Annual cost to finance it
$37,500
10% of $375,000
Of which, late payment
$12,500
The part follow-up alone would remove
If you shortened by 10 days
$83,333 released once
$8,333 saved every year
Reeve closes the gap between stated and actual days by following up on every invoice from day 1, in your name. Start a free trial
How it is calculated
Formula
Cash tied up = Monthly invoicing ÷ 30 × Days to pay
Every day between invoicing and payment is a day of revenue sitting in receivables instead of the bank. Dividing monthly invoicing by 30 gives average daily credit sales; multiplying by days gives the receivables balance that level of invoicing sustains. At net 30 with $250,000 a month, that is $250,000 permanently outstanding; at net 60, $500,000.
Stated terms are the floor. Clients pay late, so the tool also takes your actual average days to pay (from a DSO calculation or your accounting system) and shows the extra cash the gap between stated and actual ties up.
The annual cost applies your cost of capital (a line of credit rate, a factoring rate, or your own required return) to the cash tied up. It is what you pay, or forgo, to finance your clients' payment habits for a year. The 'if you shortened by N days' line shows what a specific improvement would release.
Common questions
What does net 30 cost compared to net 60?
Thirty days of invoicing. At $250,000 a month, net 60 keeps about $500,000 in receivables versus $250,000 at net 30. At a 10% cost of capital, that extra $250,000 costs roughly $25,000 a year to finance.
What cost of capital should I use?
The rate you actually pay to bridge the gap: your line of credit's interest rate, your factoring rate annualized, or, if you fund it from cash, the return you would otherwise earn. 8% to 12% is typical for a small business line of credit; factoring is usually far higher.
How do I know my actual days to pay?
Compute DSO (there is a calculator for it on this site), or use average days to pay on paid invoices from your accounting system. If you are not sure, terms plus 15 days is a realistic starting assumption for most B2B service businesses.
Is shortening terms or improving follow-up the better lever?
Usually follow-up. Terms are negotiated with clients; the gap between stated and actual days is mostly a follow-up gap and is entirely within your control. Closing it is worth as much as a terms change and costs nothing.
Does this store my numbers?
No. Everything runs in your browser.
Your whole AR, on autopilot.
Reeve collects every overdue invoice in your name and shows you exactly where you stand.
Ten minutes to set up. 7-day free trial. Stops the moment they pay.