How Many Days Early Is Early Enough? Payment Lead Time, Processing Delay, and the Expected Cost of Late Fees

Paying a bill on its due date is not paying it on time: between the payer's action and the creditor's receipt sits a processing delay, and the delay has a distribution with a tail. This paper simulates that delay for electronic payment (mean 1.2 days) and paper cheque (mean 4.5 days) over 200,000 draws each, and computes the lead time — days before the due date — at which lateness becomes rare. Paying electronically on the due date itself is late in 93.3% of cases; three days early reduces that to 1.2%. A paper cheque needs 10 days of lead to bring lateness under 1%, against 4 days electronically. At six bills a month and an expected cost of USD 34.40 per late payment, paying paper cheques on the due date costs an expected USD 2445.84 a year in fees; the correct lead time costs nothing. The study is simulated, not measured. SIMULATED, NOT MEASURED.