Your customers take ten more days to pay. Who funds the gap?

A Portuguese supplier sells €7.3 million a year on credit. Customers take an average of 60 days to pay. They then start taking 70.

Nothing else changes in this example: the same sales, the same prices and the same operating costs. Yet another €200,000 becomes tied up in unpaid invoices. The business needs to fund that gap before considering any new machinery, acquisition or dividend.

The first financing question is therefore specific: is this money supporting a worthwhile growth plan, or paying for customer credit that the business has allowed to expand?

Start with the right measure

The OECD's financing scoreboard, published on 31 March 2026, records Portuguese B2B payment delays of 17 days in 2024, compared with 15 in 2023. These are historical payment-delay observations, not a current quotation or a measure of the full time from invoicing to collection.[1]

That distinction matters. A customer paying 15 days late on a 30-day invoice creates a different cash exposure from one paying 15 days late on a 90-day invoice. Contractual terms, overdue days and total collection time answer different questions.

For the company's cash model, use total collection time. Start with the actual invoice and receipt records, separate cash sales, and examine overdue balances by customer. An average can conceal one large disputed invoice or a deteriorating account.

Ten days can require €200,000

Our hypothetical company makes €7.3 million of annual credit sales, evenly through the year. That is €20,000 a day.

A simplified steady-state estimate is:

Receivables = annual credit sales ÷ 365 × collection days.

The model excludes VAT, seasonality, bad debts and changes in inventory or supplier credit. All company inputs are assumptions, not Portuguese market averages.

A lasting ten-day deterioration increases the receivables balance by €200,000. This is an additional stock of money tied up, not a new €200,000 expense every year. Funding it can create a recurring interest expense.

At an assumed 6% annual borrowing rate, maintaining an extra €200,000 of borrowing for a full year costs €12,000 before fees and taxes. The 6% is a modelling input, not a lender offer.

Growth makes the collection problem larger. At the higher sales level, each collection day represents €24,000. The final scenario needs €480,000 more receivables than the starting position: €240,000 for growth at unchanged terms, plus €240,000 for the extra ten days on the enlarged business.

This is only the receivables requirement. Stock, equipment and payroll timing can add further pressure; supplier credit and cash generated during the transition can offset it. A monthly forecast must establish the actual peak funding need.

Recover cash without confusing it with profit

If the company collects ten days sooner without changing prices or losing customers, around €200,000 becomes available as the receivables balance falls.

That cash release does not create €200,000 of operating profit. The sale was already recognised. It can reduce borrowing, fund stock or rebuild a liquidity reserve. If borrowing falls, the interest saving is a separate recurring benefit.

The practical work starts before the invoice becomes overdue. Check whether purchase-order references are correct, goods have been accepted, invoices reached the customer's payment system, and disputes have a named person responsible for resolution.

Then separate customers who need an administrative fix from those seeking longer credit and those who may be unable to pay. Financing a disputed or uncollectible invoice does not make the underlying problem disappear.

A 1% discount may be an expensive shortcut

Suppose a customer owes €100,000 in ten days. The supplier offers a 1% discount for payment today.

It receives €99,000 now and gives up €1,000 to obtain the money ten days earlier. The cost is about 1.01% of the cash received for those ten days.

A simple annualised comparison is:

€1,000 ÷ €99,000 × 365 ÷ 10 = 36.9%.

This is a comparison convention, not a regulatory APR or a compounded annual return. It shows why the size of the discount means little without the number of days gained.

If every customer in the €7.3 million example takes that discount, the company gives up €73,000 of annual revenue to bring receipts forward by ten days. The timing benefit releases roughly €200,000 before allowing for the lower invoice proceeds.

That annual revenue cost is much larger than the €12,000 interest-only illustration. The two options still differ in availability, fees, credit risk and contractual conditions. A discount may be sensible where it also reduces collection work or a material risk of non-payment.

Apply it selectively and measure the payment change. A customer who takes the discount but pays on the old date has received a price reduction without providing the intended financing benefit.

Invoice finance: compare euros, days and risk

Factoring can advance funds against receivables. CGD's current product description distinguishes financing with recourse, where the supplier remains responsible for repayment if the debtor does not pay, from non-recourse arrangements offering debtor non-payment cover.[2]

The contract still needs to establish exactly which risks are covered. Check the eligible customers, advance percentage, approved limits, exclusions, fees and treatment of disputed invoices. A product label is not enough.

Consider a separate hypothetical €100,000 invoice, with €80,000 advanced for 60 days, 6% annual interest and a fee of 0.5% of the invoice's face value.

The total is 1.61% of the gross advance for 60 days. Simple annualisation gives 9.8% on that denominator, despite the 6% interest input.

This is not the contractual effective rate. If charges are withheld upfront, net cash received is lower. Taxes, opening costs, debtor charges, insurance and other contract costs would also change the comparison.

Banco de Portugal explains that published interest schedules are indicative and actual rates depend on the operation and customer risk.[3] Compare written offers using the same invoices, dates, net cash received and included costs.

Choose capital after diagnosing the gap

A short collection disruption with sound customers may justify temporary working-capital finance. A growing business with a permanently larger receivables base needs a funding plan that remains available as sales expand.

Equity can help finance a broader growth plan and provide a buffer against uncertainty. It also changes ownership and governance. Bringing in an investor does not remove the need to manage customer credit.

For an investor reviewing a Portuguese company, ask how much of the sales forecast must be financed before customers pay. Test overdue balances, customer concentration and collections separately from reported earnings. A forecast that assumes growth and faster payment together needs evidence for both.

For an owner, prepare three numbers before approaching a capital provider: cash tied up today, additional cash required under the growth plan, and the peak requirement if collection slows.

Then decide which part can be recovered operationally and which part needs external funding. That makes the capital request more precise and the proposed structure easier to assess.