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Would tighter credit improve profit despite lost sales?
Balance bad-debt reduction and lower receivables funding with the contribution of rejected sales.
Example scenario
Editable demonstration inputs, not verified industry benchmarks. Enable JavaScript to calculate your own scenario.
- Annual credit sales
- $5,000,000
- Current bad-debt share of sales
- 3 %
- Target bad-debt share on retained sales
- 1 %
- Credit sales lost under tighter policy
- 4 %
- Contribution margin on sales
- 35 %
- Current receivable days
- 60 days
- New receivable days
- 45 days
- Annual receivables funding cost
- 12 %
Annual tighter-credit net contribution
Example result only, not a forecast or promise.
- Expected bad-debt cost reduction
- $102,000
- Lost sales contribution
- $70,000
- Receivables cash released
- $230,137
What to do with this result
Segment the policy by customer risk and profitability; do not assume all slow-paying customers should be rejected.
Know what is inside the model.
Planning model, not personalized financial advice. Your inputs remain in your browser.
Calculation method
Net = old bad debts − new retained-sales bad debts − contribution on lost sales + funding rate × (old receivables − new receivables).
Assumptions and limitations
- Example inputs are editable scenarios, not Aryo results or independently verified industry benchmarks.
- Planning scenarios are not lending, investment, tax or legal advice. Rates, prices, probabilities and transaction terms are supplied assumptions.