Why Track Payment Delays?

Late payments hurt cash flow and can strain small business finances. Knowing how much income you lose waiting on overdue invoices adds urgency to follow-ups. It also guides your decision to charge late fees or adjust terms for habitually slow clients. This calculator shows the cost of delay in concrete dollars.

Calculating Lost Interest

Let $A$ be the invoice amount, $T$ your standard payment terms in days, and $P$ the actual payment day. The delay $D$ is simply $P-T$. If $D$ is positive, you waited longer than expected. The interest cost $C$ uses an annual rate $r$:

$$C=A\times \frac{r}{100}\times \frac{D}{365}$$

This represents the opportunity cost of that money sitting unpaid. Even a couple weeks can add up if margins are tight.

Example Table

Invoice	Terms	Paid	Interest Lost
$1,000	30 days	45 days	$2.05
$5,000	15 days	40 days	$17.12

Improving Cash Flow

Automated reminders, early-payment discounts and clear contract language encourage timely payments. If clients regularly pay late, consider shorter terms or partial up-front deposits. The calculator quantifies the hidden cost of waiting so you can weigh whether firmer policies are worthwhile.

When to Charge Late Fees

Many businesses include a late fee after a grace period. Knowing the dollars at stake helps you set a reasonable penalty. Communication is key—notify clients of overdue balances promptly. By putting real numbers to the delay, you can protect your bottom line while maintaining professional relationships.