What late payment really costs: interest, €40 and the cost of working capital

When a customer pays an invoice on the forty-seventh day instead of the thirtieth, the cost is not zero. But it is almost never calculated, because it has three parts and only one of them is visible.

Part one — the cost of working capital

Seventeen extra days mean that for seventeen days your money is working in your customer's business, not in yours. If you are drawing on a credit line at the time, the cost is direct — it is the interest you pay the bank.

This is the only part that finance directors usually feel, although they do not always attribute it to a particular customer.

Part two — statutory interest

Directive 2011/7/EU provides for interest equal to the ECB reference rate plus at least eight percentage points. In some countries the margin is higher — in Germany, nine percentage points above the base rate apply in B2B relations.

The key feature: the right arises automatically once the term expires. No reminder, no contractual clause and no agreement is needed.

Part three — the fixed compensation

For every invoice paid late you are entitled to a compensation of no less than forty euros for recovery costs. Not per debt, not per customer — per invoice.

This is the part that surprises most. A company issuing five hundred invoices a year, three hundred of which are paid late, is entitled to twelve thousand euros from that compensation alone. Interest comes on top.

In Poland the compensation is tiered — its size depends on the value of the invoice.

Why the figure never gets calculated

Not because it is difficult. Because it requires joining three things that usually sit apart: the invoice register with payment dates, the agreed terms per customer, and the national rule.

The accounting system shows DSO. It does not show what the gap between DSO and the agreed term costs in euros, customer by customer.

What to do with the figure

Not necessarily demand it. The most common use is a different one — next year's contract negotiation, and pricing. A customer who systematically pays twice as slowly as agreed is effectively getting a discount nobody ever agreed to.