Receivables Dilution Calculator
This free calculator computes the dilution rate on a receivables pool and the maximum advance rate it safely supports. Enter gross credit sales, total dilutive items (credit memos, returns, discounts, short-pays), and your current advance rate.
What dilution is
Dilution is the share of gross receivables that never turns into cash, lost to credit memos, returns, allowances, discounts, and short-pays. Expressed as a percentage of gross sales, it measures how much of the billed amount fails to collect.
How the dilution rate is calculated
Divide total dilutive items by gross credit sales for the same period, then multiply by 100. For example, 50,000 dollars of dilutive items on 1,000,000 dollars of gross sales is a 5 percent dilution rate.
How dilution affects the advance rate
Dilution directly reduces collections, so lenders cap the advance rate against it. A common rule of thumb sets the maximum advance rate at 100 percent minus the dilution percentage, so a book with 12 percent dilution supports an advance rate no higher than about 88 percent. The calculator flags when a current advance rate exceeds that cap.
For lenders
Dilution moves continuously as memos and short-pays accumulate, so monitoring it only at month-end leaves the borrowing base overstated in between. Zolvo tracks dilution, aging, and concentration in real time through portfolio monitoring and reconciles the cash that reveals it, see asset-based lending.
Frequently asked questions
What is receivables dilution?
Dilution is the gap between the face value of receivables and what is actually collected, caused by credit memos, returns, discounts, short-pays, and other non-cash reductions, expressed as a percentage of gross sales or receivables.
How is the dilution rate calculated?
Divide total dilutive items by gross credit sales for the period and multiply by 100.
How does dilution affect the advance rate?
Lenders commonly cap the advance rate at 100 percent minus the dilution percentage, so higher dilution means a lower safe advance rate.
Why monitor dilution continuously?
Dilution moves as memos and short-pays accumulate; tracking it continuously lets a lender adjust the advance rate or reserves before the borrowing base is overstated.