The subject Customer & Co has two outstanding invoices issued with due date October 1st, 2008. The total due amount is €1000. The payment of the first invoice amount of €998 is made three days after issue. On the other hand, they pay the remaining €2 30 days following value date:
The amount of €2 is paid for after 3 days. The remaining amount of €998 is paid for 30 days following value date:
The late payments report shows the following:
Receivables/payables, payments and % paid are the same for both cases. The same holds good for Maximum, Weighted and Average delay.
Calculating average delay for both documents:
(No. of days of days of delay of first payment + No. of days of delay of second payment) / No. of payments = (2 +300)/2=151
The amount of difference incurred is represented by weighted delay. The greater amount was delayed longer in the first document (The partial payment of €2 was made in three days; the payment in the amount of €998, however, only after 30 days). On the other hand, it was the other way round with the second document (That is, the document was almost completely paid for with payment of €998 made after three days; the remaining amount of €2 was paid for after 30 days.).
Calculating weighted delay for document:
(No. of days of delay of the first payment + No. of days of delay of the second payment) / amount of payments = (3*2 + 30*998) / 1000 = 29.95
Calculating weighted delay for document:
(No. of days of delay of the first payment + No. of days of delay of the second payment) / amount of payments = (3*998 + 30*2) / 1000 = 3.5
Therefore, a difference does occur when payment of a smaller or greater amount is delayed for a longer period. The Weigthed delay column informs you of how long will the total payment be delayed; regardless of the partial payment. The first example shows that total payment will be delayed by 29,95 days (that is, almost 30 because €2 represent a very small portion of the entire receivable). On the other hand, the second example shows that the amount will be delayed by 3.5 days (that is, because the entire amount was paid for in the first three days; and the remaining €2 have been paid 30 days after value date. This does not significantly affect weighted delay).