Guide
Days to cash: what Net 15, Net 30 and Net 45 tie up
Payment terms are written in days. Your bank balance feels them in dollars. The conversion is one line of arithmetic.
In short
- Cash tied up = weekly billed revenue x days to cash / 7.
- Days to cash is the days to send the invoice plus the days the broker takes to pay. Use the real number, not the term on paper.
- Your own days to pay (DTP) is the average of deposit date minus invoice date over recent paid invoices, weighted by amount.
- Every day you remove frees the same amount again. That is the value of a faster broker or a quick pay.
Hook. At $18,000 a week, each extra day to cash ties up $2,571. The gap between Net 15 and Net 45 is $77,143 of your own money tied up for as long as you bill at that pace.
A term is a loan you did not choose
When a broker pays in 30 days, you carry the cost of fuel, drivers and payments for 30 days. The money does not vanish. It sits in an invoice you cannot spend. The longer the wait, the bigger the pile.
The figure draws three terms as bars of equal scale. The longer bar is the one that holds more cash. The table below turns days into dollars for an example fleet.
Compare this with the cost of quick pay or a factor. See quick pay fee math, and run both sides in the cash flow simulator.
Find your real days to cash in five steps
Pick 20 recent paid invoices
Take them from different brokers, so one broker does not dominate.
Write two dates each
Invoice date and deposit date.
Count days
Deposit date minus invoice date.
Weight by amount
Multiply days by amount, add, divide by total amount. That is your DTP.
Convert to dollars
Weekly billed revenue x DTP / 7.
Terms and what they tie up
| Term | Days to invoice | Total days to cash | Cash tied up |
|---|---|---|---|
| Net 15 | 2 | 17 | $43,714 |
| Net 30 | 2 | 32 | $82,286 |
| Net 45 | 2 | 47 | $120,857 |
Worked example EXAMPLE VALUES
Example data. An invented fleet bills $18,000 a week. Six paid invoices below give the fleet's own days to pay.
| Invoice | Amount | Days to pay | Amount x days |
|---|---|---|---|
| #1 | $2,400 | 28 | 67,200 |
| #2 | $2,150 | 34 | 73,100 |
| #3 | $2,980 | 52 | 154,960 |
| #4 | $1,900 | 41 | 77,900 |
| #5 | $2,670 | 38 | 101,460 |
| #6 | $2,200 | 30 | 66,000 |
| Total | $14,300 | DTP 37.8 | 540,620 |
The weighted DTP is 37.8 days. At $18,000 a week, that ties up about $97,214. If the same fleet were paid in 30 days it would tie up $77,143, a difference of $20,072. That number is what a faster payer, a better term or a quick pay is competing against. The comparison is the whole decision: a fee that frees $20,072 for a month is cheap or dear depending on what that cash would otherwise do. Price that with your own numbers, not with a rule of thumb.
Where it goes wrong
- Using the term, not the real days. A Net 30 broker who pays in 50 days is a Net 50 broker.
- Averaging without weights. A small invoice paid early hides a large one paid late.
- Forgetting invoice delay. Days to send the invoice count too. See clean invoice packet.
- Comparing percent to days. A fee in percent needs to be turned into cost per day. See quick pay math.
The formulas
Use billed revenue for the same period as the days. Do not mix months.
Terms live in your contract
Payment terms come from your rate con or broker agreement. We do not assume any broker's terms. The numbers here are invented. Read your paperwork for the real days.
We do not give legal, tax or financial advice. Your contracts come first.
Questions
What is a good DTP?
No number fits everyone. Compare yours month to month and by broker.
Does quick pay change this?
Yes. It shortens the days and charges a fee. See quick pay fee math.
Should I drop slow brokers?
Not by DTP alone. Add rate and reliability. See broker scorecard.
How often should I recompute it?
Monthly, in the month end close.
Related: quick pay fee math, 13 week cash flow, broker payment delay, pay or wait, all guides.
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