The price of one day of payment time

There are two kinds of money in a business: the money you have, and the money you have earned. The difference between the two is called payment time, and it carries a price that is almost never written down anywhere.

The arithmetic is banal, and that is precisely why it is so easy not to do. A business with 50m kr. in annual revenue turns over roughly 137,000 kr. a day. Every day that passes, on average, from the invoice going out to the money landing in the account ties up exactly that amount in the debtor ledger. Not as a loss. As waiting.

::figur[bundet]

It is not income. It is a homecoming

Note what the chart is actually saying. Move from 60 to 45 days of average payment time and just over 2m kr. comes home. That 2m kr. is not a sale you have to go out and make. It is money you have already earned, and it is sitting with your customers.

It is also a one-off effect, and it is worth being honest about that: the capital comes home once. But it stays home for as long as payment time is held down — and until it comes home, it costs interest every single day.

::figur[rente]

What your capital costs, you know better than we do. If you are drawing on an overdraft, it is that rate. If you are self-financed, it is the return the money would otherwise have made. Either way, those 15 days are not free, and they do not appear on any profit and loss account under a name of their own.

The days are not lost where you think

The common assumption is that payment time is something customers decide. It is not. It is the sum of four things, and you control three of them.

The payment terms. Net 30 is not a law of nature, it is a choice — and between businesses it is a choice you negotiate. If you have not written anything down, the default position in the legislation applies, not yours.

The quality of the invoice. An invoice missing a purchase order number does not get rejected. It gets set aside. That does not cost you an argument, it costs you two weeks.

The reminder cadence. This is where the days really sit. A reminder run that happens “when there is time” adds three to ten days to every single overdue invoice, and those days stack up across the entire debtor ledger. The deadline starts running when the letter has been sent — not when it ought to have been sent.

The consequence. A reminder without a consequence is a courtesy notice, and courtesy notices go to the bottom of the pile. The consequence is not a sharper choice of words. It is a collection notice with a ten-day deadline, and the fact that it is followed through.

Interest is not the point — but it is not nothing either

Default interest is the Danish central bank’s lending rate plus 8 percentage points, and it runs from the due date. It is not a business model, and nobody gets rich on it. But it is the statutory price of waiting, and it is worth knowing for two reasons.

First, because between businesses a higher rate can be agreed. It is one of the most overlooked lines in a set of terms of business, and one of the cheapest to put right.

Second, because it is a signal. A customer who receives an interest statement knows that someone is keeping score. A customer who never does knows the opposite — and arranges their own cash management accordingly. The companies that pay you last do not pay everyone else last. They pay last those who do nothing about it.

What actually has to be done

There is no cure for payment time. There is only a cadence that is kept.

Set deadlines you can defend. Send the first reminder the day after the due date — not on Friday. Add the fee every time you are allowed to. And let the collection notice go out when the deadline has passed, instead of sending a fourth reminder that teaches the debtor nothing will happen.

It is not a project. It is a calendar that is kept, every single day, without anyone having to remember it. And that is the whole difference between 60 days and 45.