how to calculate cash gain?

[lisaly23]

hi there!

i was wondering how i can calculate the potential gain in cash if i can pay my supplier from 10 days to 30 days.

i wanna leave out intentionally the opportunity costs or the cost of equity.

just the mere cash impact. example: i paid a supplier 1 m � in 10 days. now i want to pay him the same amount in 30 days.

how do i calculate that?

thx

[factor-fiction]

Are you asking what interest you can gain on holding the money for an extra 20 days? A good measure is to take the figure of �1m, work out the annual interest (eg 3% would be �30000 pa), then divide the interest by 365 days to get a daily rate, then multiply by 20 days. That's about �1600 a year interest (before tax).

Or do you just mean cash flow? If you pay suppliers a total of �1m a year, spread evenly over the year, that equates to paying out �2740 a day (i.e. �1m divided by 365 days). If you hold onto all your money for 20 days extra you will on average hold an extra 20 x �2470= �54795 in cash at any one time.

[factor-fiction]

Small typo- the last �2470 figure should say �2740 but the final figure of �54795 is right based on an assumed payments figure of �1m pa spread evenly over the year.