Cost of Debt Calculator

What Is the Cost of Debt?

The cost of debt goes far beyond the face value of an unpaid invoice. When a customer doesn't pay on time, your business absorbs multiple hidden costs: the capital you can't reinvest, the profit opportunities you miss, the inflation that erodes the value of the money owed, and the operational overhead of chasing payment.

These costs compound over time. A £10,000 invoice that's 90 days overdue doesn't just cost you £10,000 — it costs you that plus the margin you could have earned, the financing cost of the cash gap, and the increasing risk that the debtor may never pay at all.

Why Waiting for Payment Costs You Money

Every day an invoice remains unpaid, your business is effectively financing your debtor's operations. The cash sitting in their account could be generating profit in yours. Inflation reduces the purchasing power of the amount owed, and your cost of capital means you're paying interest on cash you should already have.

Beyond the financial mechanics, delayed payments create operational strain. Your finance team spends time chasing instead of adding value. Your cashflow forecasts become unreliable. And the longer a debt ages, the less likely it is to be recovered in full.

When to Settle vs Wait

Many businesses default to waiting for full payment, but this isn't always the smartest financial decision. If a £10,000 debt is 60 days overdue with uncertain recovery, accepting a 90% settlement today often delivers better net value than waiting six more months for 100% — which may never arrive.

The right approach depends on your cost of capital, the debtor's behaviour, and how much the delay is costing you. This calculator helps quantify that decision so you can act based on data rather than hope.

How to Reduce the Cost of Debt

The fastest way to reduce the cost of unpaid invoices is to shorten the time between invoice issue and payment. This means chasing from day one, following up consistently, offering flexible payment options when appropriate, and escalating firmly when debtors stop responding.

Tools like AutoSettle automate this entire process using AI credit controllers that chase every overdue invoice, offer payment plans through a debtor portal, and escalate to pre-legal action when needed — all without manual effort from your team.