Find out how much your customers can owe you before it eats into the money that keeps your business running.
Letting a good customer pay later can win you the sale. But until they pay, that money is not in your hands, and your rent, staff and stock still have to be paid. This calculator works out how much of that waiting your business can afford right now, from your own figures.
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Start with the cash you can spend now. Take away the money you want to keep so the business can run for a few months even if no customer pays: your monthly running costs times the number of months you choose. What is left is your room for customer debt at this time. If customers owe you less than that, you are within your comfort level; if they owe you more, the difference is how far outside it you are. If your cash is already below what you want to keep, there is no room yet, and the first job is to get paid what is already owed.
Customer debt is money owed to you for work you have already delivered or goods you have already handed over. A balance on an order you haven't finished yet is not customer debt: the customer hasn't received anything, and you haven't finished spending on it. That is why the calculator asks only for what is owed on delivered work, and why time to pay is counted from the day you delivered.
How much customer debt is safe right now. Your cash, minus the money you want to keep to keep the business running, is your room. The calculator sets what customers owe you against that room and shows the difference in your own currency.
How quickly customers need to pay. If you want to keep, say, two months of money in reserve, customers should on average pay within about two months of delivery. The calculator compares that with how long your customers usually take.
A worked example (illustrative figures): running costs are ₦300,000 a month and you want to keep two months, so ₦600,000 stays put. You have ₦850,000 you can spend now, which leaves ₦250,000 of room. Customers owe you ₦400,000 for delivered work, so they owe ₦150,000 more than your comfort level.
There is no single right amount of customer debt, so the calculator doesn't grade you against other businesses. The one judgement in it is yours: how many months of running costs you want to keep in hand, from one to five. If you have to buy stock every month, or you take money from the business to live on, turn those on too, because that money has to come from the same cash.
The calculator doesn't tell you what to do; it shows where you stand. Owners in this position usually start by collecting what is already owed before giving new credit, and by agreeing clear terms up front — a deposit, instalments, or a date to pay — for the next credit sale.
Monyvo Business Assistant keeps every unpaid balance with its dates, gets a reminder ready when each one is due, and shows who's late.
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