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July 5th, 2012, 04:07 PM   #1
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Projected Annual Yield

Hi all,

Im struggling to figure out how to calculate projected annual ROI (maybe I should call this projected annual yield?).

For background: I run a factoring business (accounts receivable financing) and advance 80% of my clients' invoices to them in 24 hours. When their customer pays us direct 30-60 days later, we rebate to the client the remaining 20% minus our discount fee which ranges 3-5% for the first 30 days an invoice is outstanding.

The attached spreadsheet shows a customer whos invoices are paid every 15 days (days between advance and receipt) but my client factors this account only once a month (days between receipts).

As I understand it, the formula for Annual Yield is: Average Invoice ROI x Average Annual Turns. The thing Im confused about is how to calculate annual turns. Would it be 365/15 or 365/30? 365/15 assumes the average invoice turns over 24 times a year but with this customer, I would receive payment only 12 times a year.

Thanks so much!
Attached Files
File Type: xlsx Shands ROI & Proj Annual Discnts Spreadsheet.xlsx (11.3 KB, 16 views)
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July 6th, 2012, 07:14 PM   #2
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Re: Projected Annual Yield

Quote:
Originally Posted by keystone
For background: I run a factoring business (accounts receivable financing) and advance 80% of my clients' invoices to them in 24 hours. When their customer pays us direct 30-60 days later, we rebate to the client the remaining 20% minus our discount fee which ranges 3-5% for the first 30 days an invoice is outstanding.
I'm your client and have an invoice due to me for $100,000;
you advance me $80,000....
45 days after your advance to me, my customer sends you $100,000;
you then send me $20,000 less "something":
what will this "something" be, and how is it calculated?

In other words, above really means I borrowed $80,000 from you,
and paid you back 45 days later: what will you charge me as interest?
Don't confuse me with fancy terms like "discount fees"...
how much will I pay you over and above the $80,000?
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