News, Tools, Training for Key / National Account Managers
(KAMs / NAMs) working in the FMCG / Retail industry

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NamCalcs Cost of Trade Credit


How much it costs the supplier to give free credit to the retailer

               
  Annual sales to the customer = (Net invoiced sales)    
  Days sales outstanding =   (How long they take to pay)  
  Therefore number of times they pay in a year =   (times per year i.e. 365 divided by number of days taken to pay)  
           
  Average amount outstanding =    
  Cost of money =   (Going rate for borrowing or IRR )  
  Cost of credit given =    
           
  Therefore the cost of credit as % of sales =        
             
  Cost & Value Calculations:          
  Supplier's net margin = %      
  Cost: Incremental sales required by supplier to recover cost of credit =      
               
  Customer's net margin = %      
  Value: Therefore, incremental sales required by customer to recover saving made on credit cost =  
 

Full toolbox of KAM calculations: If you have found this calculating tool useful,
why not consider buying our latest version of NamCalc, containing 34 tools, for only £49 - see KamShop

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