Cash Locked Up in Finished Work — Pricing the Cost of Waiting for Payment

This article covers management-accounting principles for decision support. It is not accounting, tax or financial advice for your specific circumstances. Interest rates and facility terms differ by business — use the real rate from your own agreement.

The job is finished, the customer is happy, the money is not here

Every business that sells work as jobs knows this — the work is done, handed over, invoiced. Then you wait 60 to 90 days.

While you wait, the money you already spent on materials has not come back, and the next job needs another outlay.

Most people know that giving credit has a cost, but they look for it in the wrong place — they look at interest, when the thing that actually trips businesses up is the money that has to stand by.

The number people reach for: interest

Same example used across this cluster — one job, materials ฿38,000 + freight ฿4,000 = cash out of ฿42,000.

The formula is one line:

Cost of waiting = cash paid out × (annual rate ÷ 365) × days waited

At 7.5% a year:

Against a quoted price of ฿88,308 — ฿468 is 0.53%.

Stop reading here and you conclude "not much", and that conclusion is what surprises businesses later.

The number that actually trips you up: the money standing by

The more important question is not "how much interest" but "how much money must exist for this business to turn over at all?"

From hours actually sold of 416 a month at 24 hours a job ⇒ roughly 17 jobs a month.

Cash paid out per month = 17 jobs × ฿42,000 ≈ ฿728,000

This is money that must be present in the system at all times. It is not money spent — it is money that cannot do anything else.

Interest on that locked-up sum over a year, at 7.5%:

The interest really is small — but ฿2.18 million that must be found before you can run 17 jobs a month is not small at all.

And it grows with turnover, always: the better you sell, the more must sit locked up. This is why profitable, fast-growing businesses run out of working capital before they run out of profit.

🔴 The base — where people most often go wrong

The genuinely arguable question is what to charge interest on.

Why the VAT-inclusive receivable does not belong in pricing — three reasons:

1. It includes profit you never paid out — charging interest on that is charging interest on your own margin
2. At ordinary 30-day terms the VAT leg is not even due for filing yet ⇒ its real cost is close to zero
3. It makes cost depend on price, while price is calculated from cost ⇒ the formula feeds on itself

ℹ️ Note — in the context of calculating sales commission, offering a choice of base is reasonable, because it is something to be agreed with staff and is genuinely arguable. We wrote that up separately in the cost of credit terms and commission — a different question from pricing.

Net off what your suppliers finance

Frequently forgotten, and it inflates prices: if a supplier gives you credit, that money is not coming out of your pocket.

Customer gives you 60 days · supplier gives you 30 ⇒ you fund the materials for 30 days only.

But keep the legs apart:

• Materials — supplier credit can be netted off
• Freight / cash-paid labour / overtime — paid immediately, cost for the full period the customer takes

Failing to net this off makes cost too high, and you lose work that would have paid — the same pattern as labour counted twice.

Putting it back into the price — when and how

At quotation time, not at invoicing, because once the contract is signed the payment terms are locked. Learning the number afterwards changes nothing except how you feel about it.

A paired option works better than simply adding it on:

"That's ฿88,300 on 60-day terms — if you settle within 15 days I can do ฿87,500."

That ฿800 is more than the true cost of waiting (฿234–468), but still less than what money returning 45 days earlier is worth to a business with tight cash — and a customer holding cash will take it immediately, because for them it beats leaving it in the bank.

Both sides genuinely gain. It is not moving money from one pocket to another.

🔴 If the customer insists on 90 days and you want the job

Three things that work, in order of effect:

1. Ask for staged payment against progress — particularly a deposit covering materials at the start, which removes the largest block of locked-up cash immediately. In this example that is ฿38,000 of ฿42,000 — nearly all of it. It is also easier for a customer to accept than shortening the terms, because they pay the same amount, just on a different rhythm.

2. Ask suppliers for longer credit — every extra day they give is a day you are not funding.

3. Price the waiting in and offer the paired option above, and let the customer choose.

What to do

1. Size the locked-up cash, not just the interest — the figure that trips businesses up is the money standing by
2. Cost it on cash actually paid out — not revenue, and not the VAT-inclusive receivable
3. Net off the days your creditors carry it — the materials leg only, not everything
4. Use the real rate from your own facility, not a figure from the news, and record why you chose it
5. Add it back at quotation time, not at invoicing
6. Offer an early settlement discount slightly above the true cost of waiting — both sides genuinely gain
7. On long terms, ask for a materials deposit before asking for fewer days — more effective and easier to accept

The tool for doing this today

Job Costing & Pricing Calculator works this line out at pricing time:

• Enter the job's credit days and it prices the cost of waiting immediately, feeding it into the price to quote
• A separate supplier-credit field nets off only the materials leg your suppliers actually finance, rather than discounting the lot
• The base is cash actually paid out, not the VAT-inclusive receivable — chosen deliberately, for the three reasons in this article
• The interest rate is a setting — enter the real rate from your own facility, not one we guessed for you
• A per-customer sheet shows which accounts habitually pay late and eat the margin you thought you had
• A self-test sheet of 24 cases you can run yourself before trusting it on live work
• No macros — Excel, LibreOffice and Google Sheets all open it

One-time payment of ฿999 — launch price until 31 Dec 2026 (regular price ฿1,490) · includes 7% Thai VAT · full Thai tax invoice available · instant download after payment

ℹ️ The workbook itself is in Thai — sheet names, labels and the in-file manual. The formulas and the logic are language-independent, and the product page shows renders of the real file so you can see exactly what you receive.

→ See the product

Read next

• How Far Can You Discount? — The Four-Number Ladder
• Which Customers Actually Make You Money