What a 60-day payment term costs ahead of the 5 November rate vote

Your biggest customer pays in 60 days. You probably know the number. You probably do not know what the wait costs you.

The cash you lend without a contract

Payment terms are a loan. Every day a buyer takes beyond the day you paid your own suppliers, you finance their stock or their month-end. The loan has no agreement, no interest line and no review date, so it never appears as a cost.

Bank Rate makes it visible again. The Bank of England held Bank Rate at 3.75% on 17 September 2026, and the next decision is due on 5 November. The Governor said that the longer energy price volatility lasts, the more likely it is that Bank Rate will need to rise. Whatever the Committee decides, the price of waiting belongs in your December and January price lists.

The problem is not small

The Office for National Statistics reports that UK producer input prices rose 8.3% in the year to September 2026, while factory gate prices rose 4.6%, the largest rise since April 2023. Costs are rising faster than selling prices. A manufacturer or wholesaler must fund more stock and more work in progress for each pound of sales, while the debtor ledger stays as long as before.

Average debtor days hides which buyers cause this.

One table, one hour

Build one row per buyer, for your three largest. Four columns: annual sales, payment terms in days, days the goods sit in your stock before dispatch, and your cost of capital.

Cash tied up is sales divided by 365, multiplied by stock days plus payment days. The yearly cost is that cash multiplied by your cost of capital.

An illustration with invented numbers, using a 9% cost of capital, which is an assumption and not a market quote:

• Buyer 1: £480,000 sales, 60-day terms, 45 days in stock. Cash tied up about £138,000. Yearly cost about £12,400, or 2.6% of sales.
• Buyer 2: £260,000 sales, 45-day terms, 30 days in stock. Cost about £4,800, or 1.9%.
• Buyer 3: £190,000 sales, 30-day terms, 60 days in stock. Cost about £4,200, or 2.2%.

Buyer 3 pays quickest and still costs more than Buyer 2, because the delay sits in your stock, not in their payment run.

Now test a common offer: 1% off for payment in 30 days instead of 60. On Buyer 1 the discount costs £4,800 a year. Thirty fewer days of waiting saves about £3,550 at 9%. The offer loses money, because the discount works out at about 12.3% a year. It pays only if your cost of capital is above that, or if your overdraft limit is the real constraint. Decide it buyer by buyer.

Tips for this week

• List your three largest buyers, their agreed terms and the days they actually pay.
• Count the days each buyer's goods sit in stock before dispatch.
• Use your own overdraft or loan rate as the cost of capital.
• Price any early-payment offer as an annual rate. The method is in Early-payment discounts: a 2% offer that costs 37% a year.
• Check your contract before charging late-payment interest. GOV.UK gives the statutory rate for business-to-business debt as 8% plus the Bank of England base rate, and it applies only where the contract sets no other rate.

Why the principle holds

GOV.UK's guidance on late commercial payments sets statutory interest on overdue invoices at a rate tied to Bank Rate. The law itself prices time at a rate that moves with Bank Rate. The same logic applies before an invoice is late: waiting has a cost from day one, and a table makes it manageable.

This is direction, not measurement. The numbers are illustrative and your cost of capital will differ. One change, one date: take the buyer with the highest cost percentage, decide what you will offer them, and review it in three months.

To see where margin leaks across customers and products, start with the Business Health Check.