Use the method of determining the optimal credit period for calculating a deferred payment. It allows you to evaluate the effectiveness of a commercial transaction, and determine acceptable conditions for its exercise. This calculation helps to compare the additional revenue received from the provision of deferred payment, risk management.
Calculate the cost of capital raised on the day. To do this, define the cost of procurement, storage, transportation and other costs of the goods. Multiply this value by the average cost of borrowed capital, which is determined by the terms of the agreement, and in fact is the interest rate on the given loan.
Divide the resulting value by 365 days. Also this value can be defined as the average return on investment. Investment in this case is the loan or value of goods, which determines the delay.
Determine the trading margin on purchased goods or received the loan, which is used to calculate the delay of payment. It is equal to the cost of implementation minus the cost of purchase. If the company is a manufacturer, trading margin will be equal to the difference between the sales price and the cost of goods manufactured.
Calculate the possible variable costs associated with the transaction and the loan.
Calculate the period of deferred payment, which is equal to the difference of the trade margin and the possible variable costs, divided by the value of capital raised on the day. Adjust this value depending on the risks of defaults on receivables.
You can also consider the liquidity of the counterparty and their creditworthiness to determine the optimal deferred payment.