What does late payment really cost an SME?
The first cost of late payment is tied-up cash: one month of delay means one month of invoicing sleeping at your clients’. With 10,000,000 FCFA invoiced per month and a 14% overdraft, 30 days of delay cost about 1,400,000 FCFA a year in interest, before counting the hidden costs.
Late payment doesn’t show on the invoice. It shows on the bank statement, at the end of the month, when salaries go out and the clients’ money hasn’t arrived. To decide what to do, you first need to put a figure on it.
How much of your money is sleeping at your clients’?
One formula is enough: monthly invoicing ÷ 30 × number of days of delay.
Fictional example. An SME invoices 10,000,000 FCFA a month. Its contracts say payment at 30 days, but its clients pay at 60 days on average. The 30 days of delay tie up 10,000,000 ÷ 30 × 30 = 10,000,000 FCFA. That is a whole month of revenue the company has earned but cannot use.
What does that gap cost if you finance it?
If the gap is covered by an overdraft at 14% a year, it costs 10,000,000 × 14% = 1,400,000 FCFA a year in interest. If your clients paid just 15 days sooner, you would save half of that: about 700,000 FCFA a year.
Which costs don’t you see?
Interest is the easiest cost to count. The others often weigh more:
- Your own suppliers paid late, and worse terms next time.
- Orders turned down because cash can’t cover materials or salaries.
- The owner’s time, spent chasing payments instead of selling or producing.
- The risk of never being paid, which grows with the age of the invoice: the older it gets, the harder it is to collect.
What should you do with the figure?
Compare it every month. A delay measured once is a snapshot; measured every month, it becomes an indicator you can bring down. The calculator does the maths for your own figures in a minute, and the aging report shows which clients account for the delay.