How do I calculate the credit period cost when giving 60 days to retailers?

Credit Period Cost Formula

Credit Cost = Invoice Value × (Annual Interest Rate ÷ 365) × Credit Days

Example: Rs 1,00,000 invoice at 12% p.a. for 60 days = Rs 1,00,000 × (12% ÷ 365) × 60 = Rs 1,973 cost to you for that single invoice.

At Scale — Annual Impact

If you have Rs 50 lakhs outstanding credit at 60 days at 12% p.a.: Annual cost = Rs 50L × 12% × (60/365) = Rs 9.86 lakhs/year in hidden financing cost. This is money you are effectively lending to retailers for free.

Recovery Strategies

1) Build credit cost into your selling price — increase MRP by 2–2.5% to cover 60-day credit cost. 2) Offer early payment discount (1–2% for payment within 15 days). 3) Use invoice discounting or factoring via banks/NBFCs to convert receivables to immediate cash. 4) Set credit limits per retailer and monitor debtors days monthly.

Use our Trade Finance Calculator for exact credit period cost calculations.