CPA’s payment terms calculator helps you to work out just how much you are losing each month in unauthorised client debts – that is to say, overdue invoices.
It’s not just a basic ‘how much interest can I charge my clients?’ calculator; it’s a fully fledged credit control calculator, taking Ultimately the idea isn’t just into account the cost of your own debts and bank charges, to work out a single client’s costs, but to calculate the total cost your own business faces due to poor cash flow.
The CPA payment terms calculator takes into account:
- Your overdraft, its size, interest rate, and how often you use it in a normal month.
- Charges for bank entries, including the charge per entry and number of entries per month.
- The number of bounced cheques you receive, and the cost of each one.
- In-house debt recovery staffing costs.
You’ll get a complete breakdown of monthly and annual costs – giving you valuable insight into how much better your ongoing cash flow needs to be.
In turn, these figures can help you when drawing up your payment terms template, as you’ll know the cost of late or non-payment, and can pass this cost on to your offending customers.
There are the usual statutory ways to do this: interest charged at the Bank of England reference rate; fixed fees based on the size of the debt; and reasonable debt recovery costs charged to the client.
But knowing the cost to your own business can help you to come up with more innovative ways to recover invoice funds more quickly.
For example, if an overdue invoice costs you £100 in overdraft fees and bank charges, it might be worth offering a small percentage discount in return for very prompt payment from the customer.
If you can do this at a cost of less than £100, your business is still benefiting overall – and payments from other clients may come in even faster than before.
This kind of flexible approach to credit control needs careful consideration on an individual basis; and with tools like CPA’s credit control calculator, you gain insight into your unique circumstances to help with such decisions.
Use our calculator here: http://www.cashprotectionagency.co.uk/calculator.html