One Customer Pays Late: Stress-Test Cash and Credit Availability Together

A large customer can strain cash twice: its payment arrives late, and the unpaid invoice stops supporting the credit line you expected to use. Before approving more on-account sales, put both effects on the same calendar.

In this fictional example, delaying one $30,000 payment by four weeks leaves projected cash at −$5,000. Keeping a chosen $5,000 cash floor needs $10,000. But on day 43, the agreement’s stipulated aging rule cuts additional formula capacity to $4,000, leaving at least $6,000 unresolved before extra financing costs. The nominal $40,000 credit limit does not close that gap.

Start with one customer and two separate records

Customer A owes $30,000 of the business’s $60,000 opening receivables. That is 50% of receivables, not 50% of revenue, a default probability or a recommended concentration limit. The decision is whether the business can afford further exposure to A while meeting existing payment dates.

Use one record for cleared cash and another for eligible collateral. A receivable is not cash, and a formula’s unused capacity is not lender-confirmed permission to draw. The example below is an original model, not a real borrower assessment or a statement of standard lender terms. All amounts are USD.

The fictional 13-week setup

• Cash: $10,000 of usable, unrestricted opening cash. Management selects a $5,000 minimum planning balance. This floor is a preference, not lender or industry guidance.
• A’s invoice: issued on relative day 0, due on day 28. Compare full payment on day 28 with full payment on day 56. No new A sales, price reduction, cancelled orders or insolvency are assumed.
• Other customers: six unrelated customers each owe $5,000. Every seventh day, $8,000 of replacement non-A invoices are issued before $8,000 of their collections clear. Allocate both across the six customers to restore each $5,000 checkpoint balance. Their receivables remain age-eligible, and collections never reduce the eligible total below $30,000 before replacement invoicing. This artificial stability isolates A’s delay.
• Weekly operating payments: $8,000 on days 7, 14 and every seventh day through day 91. This includes all other stipulated supplier, overhead, tax, owner and existing-revolver service costs. No unlisted transactions occur.
• Additional scheduled payments: $4,000 payroll plus $1,000 of separate other-debt service on days 14, 28, 42, 56, 70 and 84. Other-debt service includes its principal and interest; it is not payment on the revolving line.
• Timing and financing: collections clear before payments on each checkpoint day; no collections occur between checkpoints. Revolver principal stays $20,000. No new draw, principal repayment or added financing enters the main cash calendar. Charges on the unchanged line balance are already in operating payments.

Panel 1: when does cash run short?

Each week brings $8,000 of other-customer receipts and $8,000 of operating payments. The table adds A’s receipt and the separately listed payroll/debt dates. Negative cash marks an unfunded projection: those payments cannot all clear without another source of funds.

Both full-collection cases receive $134,000, pay $134,000 and finish with $10,000. That identical ending balance hides the problem. On-time payment keeps the minimum at $5,000. With the delay, cash first breaches the chosen floor on day 28 and first goes negative on day 42, a payroll and debt-service date. Its minimum is −$5,000 on days 42–55.

The maximum floor shortfall is $5,000 minus −$5,000, or $10,000. Do not add repeated negative balances together. These checkpoints capture the lows only because the model puts cleared receipts before payments and has no intervening cash movements. Use actual daily clearing dates for a real business. For the broader sizing method, see sizing a working-capital loan from a cash gap.

Panel 2: how much of the unpaid invoice still supports credit?

The invented revolving agreement has a $40,000 commitment and advances 80% of eligible receivables. There is no inventory or other collateral, reserve, letter of credit, other utilization, hard block, discretionary hold, reporting lag or other restriction. There is also no automatic cash sweep or required principal repayment from collections. Actual agreements can differ materially.

Apply its two fictional eligibility tests in this order:

1. Aging first: exclude A’s entire invoice when it is more than 14 calendar days past due. It remains age-eligible on day 42 and becomes ineligible at the start of day 43.
2. Concentration second: cap each customer’s remaining eligible receivables at a fixed $15,000. While A’s invoice is age-eligible, exclude only its $15,000 excess. This is a dollar sublimit, not a percentage of a changing receivables denominator.

Once aging excludes A’s $30,000, the additional concentration exclusion is $0. Excluding another $15,000 would count the same dollars twice. A has only one invoice, so this example needs no cross-aging of its other invoices.

The ceiling is the lesser of $40,000 or 80% of eligible receivables. Signed formula headroom equals that ceiling minus line utilization. Positive headroom is additional formula capacity; negative headroom identifies an overadvance. See how a borrowing base limits available credit for the general calculation.

The day-43 event links the two panels

At the start of day 43, A’s invoice is 15 days overdue. No cash changes hands: delayed-case cash stays at −$5,000. Yet eligible receivables fall from $45,000 to $30,000, the ceiling falls from $36,000 to $24,000, and headroom falls from $16,000 to $4,000.

Keeping the selected $5,000 floor requires $10,000. Even if the lender permits the full $4,000 formula draw, $6,000 remains unresolved before new interest, fees and any repayment requirements. If less can actually be drawn, the unresolved amount is larger.

Drawing $10,000 earlier does not remove this later problem. It would raise total line principal from $20,000 to $30,000. On day 43, the $24,000 ceiling would then leave a $6,000 overadvance. Do not assume the lender allows that position or grants a particular cure period. If an immediate repayment were required, it would take cash back out of the business.

Notice what happens when A does pay. On-time collection on day 28 removes the invoice’s collateral support but delivers $30,000 cash. With the delay, aging removes that support on day 43 without delivering cash. Payment on day 56 then adds cash; it does not remove eligible A collateral a second time, because A was already ineligible.

Do not add the $30,000 delayed receipt to the $12,000 reduction in capacity and call it a $42,000 funding request. The cash calendar already measures the cash need. The collateral panel tests how much of that need the line might cover. A funded plan must then add the actual financing costs and repayment dates.

If A still has not paid by week 13

A separate sensitivity assumes no A collection within the 91-day horizon, with every other transaction unchanged. Cash ends at −$20,000; the chosen-floor need reaches $25,000. Subtracting $4,000 of formula capacity leaves $21,000 unresolved before added financing costs.

No collection during this horizon is not proof of permanent default. The invoice remains recorded in this model even after it becomes collateral-ineligible. If you separately assume the entire amount is ultimately unrecoverable, with no recovery or replacement receipts, $30,000 of cash never arrives. That does not by itself specify an accounting write-off or a $30,000 profit deduction: allowances, accounting recognition, recoveries and tax effects are outside this model.

A collection delay changes cash timing without assuming lower earned revenue. Losing A’s future orders would require a different sales-and-cost forecast.

Decide before adding more on-account exposure

For this fictional business, the existing plan does not support approving more A exposure merely because the line advertises a $40,000 commitment. First resolve the day-43 shortfall and added financing costs, and verify availability through the expected collection and repayment dates.

1. Validate payment timing. Record invoice, due and promised cleared-payment dates, disputed amounts and evidence behind A’s promise.
2. Rebuild eligibility by customer group. Track gross balance, aging exclusion, concentration exclusion and eligible balance without overlap. Group related customers where the actual agreement requires it; extra account names alone do not diversify exposure.
3. Confirm the usable line. Ask the lender what can be drawn on each critical date and what happens if eligibility falls after a draw.
4. Close the first uncovered payment date. Evaluate earlier cleared customer funds, reduced new exposure, documented alternative funding or an agreed revised cost calendar. None is assumed available here. For future term changes, use the separate guide to customer deposits and milestone payments.

Keep the worksheet’s cash and collateral records linked by date. The useful limit is the exposure your verified payment-and-funding plan can withstand, not a generic customer percentage.

Source and model boundary

The OCC handbook discusses customer dependence, eligibility and revolving-credit controls. It is supervisory guidance, not this business’s contract. Confirm actual eligibility, customer grouping, advance rates, reserves, reporting dates, cash sweeps and shortfall consequences with the lender. OCC, Asset-Based Lending, printed pages 3, 13 and 16–18.

The handbook is version 1.1, January 27, 2017, with a March 20, 2025 notice removing reputation-risk references; checked October 20, 2026. The cash flows, $15,000 sublimit and 14-day overdue rule above are fictional assumptions, not OCC-prescribed terms. This educational example is not individualized lending or accounting advice.