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What do these payment terms actually cost me?

Net 30, net 60, two percent for paying in ten days: what the terms cost you is set by how the customer actually pays, not by the number on the invoice. This page runs the cost on your own invoice, your own observed days-to-pay and your own cost of money, per invoice and per year, then answers the decision: accept the terms, negotiate shorter, price the terms into the quote, or decline the contract. If a discount is on the table it answers that too, separately.

Every field starts blank on purpose. This page holds no typical days-to-pay, no typical terms, no typical discount and no cost of money: every number comes off a document already in your hands, and the page says which one. Where you ask how your number compares, the answer is your number. The full reasoning, a worked example and the evidence record are in the article What do these payment terms actually cost me?. Your numbers stay in your browser; nothing is sent or stored.

1. The invoice and how often you bill this customer

From the last three invoices and the billing calendar. You, from the invoice file; the bookkeeper, from the sales ledger.

One invoice to this customer, the size you usually send requiredThe amount on the invoice, in dollars. Without it nothing runs

How often you bill them, in days between invoicesWeekly, every two weeks, monthly, per milestone: the number of days between one invoice and the next. Leave blank and the per-year figures, the capital tied up and the exposure at loss are not tested, and the page says so

2. The terms on the invoice today, as written

Off the invoice, the purchase order or the vendor agreement in hand. You; the contract.

Net days on the invoice today requiredThe number after the word net. Due on receipt is 0, entered by you. There is no comparison without today's terms

3. What is on the table: new terms, and/or a discount for paying faster

From the proposed agreement or the accounts-payable email; the discount as a percent and its window in days from the invoice date; and, from your own experience with this customer, whether they have taken a discount and still paid late. You; the contract; the aging report for the last part.

Proposed net daysLeave blank if no new terms are proposed; the headline then runs on today's terms and the extension cost is not tested

Discount for paying faster, as a percent of the invoiceLeave blank if no discount is on the table. Enter 0 if a zero discount is what is on the table: zero is a value, not a blank, and the page will say it treated it as zero

Discount window, in days from the invoice dateBy what day the customer must pay to take the discount, counted from the invoice date

Has this customer taken a discount and still paid late?Your own experience with this customer, from the aging report. This page never infers it from how long they take to pay.

4. How long this customer actually takes to pay

The receivables aging for this customer, or the last three to five invoices against the bank statement: invoice date to money in the bank. Not the terms. You, from the statements; the bookkeeper, from the aging.

Observed days from invoice date to money in the bankLeave blank and every figure runs on the contract number instead, which is why the cash never arrives when the spreadsheet says it will; the page flags it

5. What money costs you, and where that number comes from

The rate on your line of credit if you would draw to cover the wait; otherwise what the cash would earn if you had it; otherwise your own figure. You; the line agreement or the last bank statement. This page supplies no rate and shows none here.

Annual cost of money, as a percentLeave blank and the carrying cost is reported in days and dollars of exposure only; no dollar cost is computed and no verdict is reached

Where that number comes fromNames the source of the figure above; it changes nothing in the arithmetic.

6. What one of these invoices leaves you after the direct cost of the work, and what it has to leave you

The bid worksheet or job cost for a recent invoice to this customer; the second number is your own floor. You; the bookkeeper for the direct cost if job costing exists. If it does not, that is the books or job-costing question, not this one.

Contribution on the invoice: what is left after the direct cost of doing the workNot gross profit and not net profit: no overhead is allocated to it. Leave blank and the contribution test is not run and no verdict is reached

What an invoice has to leave you for the work to be worth doingYour own floor. Leave blank and the floor is zero, flagged; the test then only asks whether anything is left

7. The bound on pricing the terms in

Largest price increase this customer would acceptAs a percent of the invoice, from your own knowledge of the customer. This bounds the price-it-in lever: any carrying cost can be recovered by a large enough price increase, so an unbounded uplift is not a lever, it is an escape hatch. Left blank, that lever is not decided and no verdict rests on it.Provisional reference: none. Source: none. Nothing is filled in and nothing is treated as a fact.

Optional: show a combination of asksOnly reported when you select one, at the full bound above. The verdict is reached on single asks first; a combination you select that cures where no single ask does resolves to its most binding ask, with the other listed beside it. No combination is recommended.

How the verdict is reached

First the slippage: the days this customer actually takes to pay, less the net days on the paper. Under proposed terms the page assumes they slip by the same amount, and says so on every figure it computes that way; the alternative, that behaviour never changes whatever the terms say, would make every extension free. The headline days are the proposed terms (or today's, if nothing is proposed) plus that slippage. Carrying cost is the invoice times your cost of money times the headline days over a year of 365 days; per year, times the invoices you send. Seven things are then checked, in a fixed order: the gap between the terms and the behaviour; the cost of the extension; whether this customer has taken a discount and still paid late, which dominates the discount arithmetic; the discount's effective annual rate against your own cost of money; whether the contribution on the invoice, less the carrying cost, still clears your floor; the capital tied up at all times; and what would be out if they stopped paying, counting a payment that lands on the day the relationship ends as still out.

The contribution test decides the verdict. If the contribution clears the floor, accept the terms, with the cost stated beside it. If it does not, three owner-side asks are tested in turn, each at the minimum that restores the floor: shorter terms, then the discount on the table if it is cheaper than your own money and this customer has not abused one, then a price increase inside the bound you entered. The first that cures names the verdict. If none does alone but a combination you selected does, the verdict follows the most binding ask in that combination, with the other listed beside it. If none does, decline; and if the invoice misses your floor before any waiting is counted, the terms were never the problem and the page says so. If the cost of money or the contribution is blank, or the only ask left is one you have not bounded, there is no verdict: the page names the one question and stops. The discount gets its own verdict alongside, whatever the terms verdict is.

What this page holds, and what it does not

It holds no benchmark: no typical days-to-pay, no typical net days by industry, no typical discount, no figure for what anyone else waits. Where you ask how your number compares, the answer is your number.
It supplies no cost of money and shows none beside that field. The rule it applies to a discount, compare its effective annual rate with a cost of funds, is the rule the federal government applies to its own bills; the government's own rates are not your number and are not on this page.
It does not interpret a contract clause, a late-fee term, a lien right or a state prompt-payment statute, and it does not predict whether the customer will pay. It scores what you say the documents say and what your own records show.
It produces no lender, factor, invoice-financing or collections service as a destination, and no probability.
It does not fill a blank field, ever, and it never shows another owner's numbers.

This calculator is informational and does not constitute financial, legal, or tax advice. It uses the numbers you enter and a day count of 365, and nothing else. What your contract permits, what to ask for, and how a discount is treated on your return are decisions for you with your attorney and your return preparer. Consult a qualified professional for decisions specific to your situation.