Bad Debt and Credit Limit Calculator

A five thousand dollar write-off does not cost five thousand dollars. At a twelve per cent net margin it costs forty-one thousand six hundred and sixty-seven — because that is how much new business you have to do to get back to where you were.

Eight times the debt. A month and a half of trading, gone, to stand still.

That is the number that changes how people feel about extending credit, and it is a division almost nobody does. You lost the goods and you lost the money both, so replacing it means earning it again out of margin rather than out of turnover. The table shows the same hole at every margin, which makes the other half of the point: a thin margin does not only earn less, it makes every loss far more expensive to repair.

Use your net margin, not your gross one. Gross flatters this badly. The replacement sales have to carry all the costs the original sales were carrying, overheads included, or nothing has actually been replaced.

The second half of the page is for the decision you make before any of that: how much credit to extend.

A credit limit breaks even at a default rate exactly equal to your margin. That is not a coincidence and it is worth carrying around: earning twelve per cent on everything you ship means you can afford to lose the whole lot twelve per cent of the time and no more. It puts a hard number on how much risk a thin margin can carry, and the answer is very little.

There is no credit score here and no view on whether a particular business will pay you. It prices the exposure and leaves the judgement where it belongs, with the person who has met them. Anything else would be a page pretending to know a customer it has never seen.

It also does not name a standard provision rate, because there is no such thing that survives contact with a real ledger. The rate that matters is the one your own customers have actually defaulted at.

Save as many versions as you like and put any two side by side, figure against figure, with the better one on each line marked and the difference in its own column. That screen is the one that decides things, and it is the part a free calculator cannot do at all. A limit that is sensible for one customer is reckless for another, and the difference is not the size of the order.

One HTML file. No account, no subscription, no internet needed. Opens on Windows, Mac and Android; the readme explains the extra step on iPhone and iPad, where Apple blocks JavaScript in downloaded files and every tool of this kind is affected.

Everything lives in your browser on your device. Nothing is uploaded, which is why it works offline and why nobody else can see your figures — and it also means clearing your browsing data deletes it. The tool does not pretend otherwise: the header shows how long since your last export at all times, turns amber after three days and red after seven, and export is one click that produces a plain file you keep.