Calculating the cost of waiting longer for money?

Question

I'm trying to calculate the cost of waiting 30 extra days to receive money from a customer. Here's the situation: > How much would this cost a company per year if a customer pays us in 60 days vs. 30 days. Assume $500,000 in sales per year. Our return is 3.6%. I am not trying to factor the receivables. I am just trying to calculate how much it costs to wait to get our money 30 days later. I have my own calculations, but I just want to verify them with someone else's or with stuff I can find online. Here are my calculations below: > (60-30) ÷ 365 * $500,000 * .036 = $1,479

Answer 1

If you know what your weighted average cost of capital is, and let's use 12% as the WACC. Then if you are waiting one additional month, then that would equate to 1% based upon the 12% WACC. So for $500,000 at 1% that would be $5000 in cost. If you are looking at this from the perspective of what the opportunity cost is for losing 1 month of interest at your per annum rate of 3.6%- that works out to .3% of $500,000.