Most labs know their collection rate is imperfect. Far fewer
have put a rupee figure on it. This does that, using your numbers.
Runs in your browser · nothing is sent anywhere · updated 2026-07-31
What it costs
Outstanding at any moment —
Carrying cost, per year —
What improving it is worth
Collecting 10 points more, each month — released, once
Collecting 15 days sooner — released, once
· — saved a year
How the arithmetic works
It is deliberately simple, because a complicated model you cannot check is
worse than a rough one you can.
Outstanding = the uncollected share of a month's billing, carried for
the average number of days it takes to arrive, expressed as a standing balance:
monthly billing × (1 − collection rate) × days ÷ 30.
Carrying cost = that balance × your cost of working capital. This is
what it costs to have the money later rather than now.
Improvements are the difference in that standing balance — money
released once — plus the ongoing saving on the carrying cost.
This prices lateness, not loss. Money that
never arrives is a separate and larger problem. Anything past ninety days
deserves to be treated as doubtful rather than merely slow.
What to do with the number
Usually the surprise is not the carrying cost — at Indian rates it is real
but rarely dramatic. The surprise is the standing balance: the amount of your
own money permanently parked with other people's businesses. That is the figure
worth taking to a conversation about credit terms.
The next question is which accounts. A single figure tells you the
size of the problem; it does not tell you where it is. Typically a small number
of accounts hold most of it.
Questions labs actually ask
What working-capital rate should I use?
Use what money actually costs you. If you have an overdraft or a working capital loan, use that rate. Indian SME lending is commonly 12-18%. If you are funding it from your own cash, use what that cash would otherwise earn.
Is a 100% collection rate realistic?
No, and chasing it is usually not worth it. The point of the calculation is to price the gap, so you can decide how much effort it deserves — not to suggest the gap should be zero.
Does this account for bad debt?
No. It prices the cost of money being late, not money never arriving. Anything past 90 days is usually a different conversation: industry experience is that less than half of it is ever realised.