# China Supplier Deposit Exposure Calculator > Source: https://netray.co/tools/china-supplier-deposit-exposure-calculator > Publisher: Netray (netray.co), AI and integration engineering for ERP and manufacturing systems. > Section: Free Tools ## Short answer See how much money is exposed before shipment when you pay a deposit and tooling prepayment, and what that exposure costs in capital and expected loss. ## Category cost-finance ## Region China ## Audience - Buyer - Finance manager - Sourcing manager ## Tool **Kind:** calculator **Currency:** $ **Inputs:** #### Order value **Key:** order_value **Type:** number **Default:** 60000 **Min:** 0 **Step:** 1000 **Unit:** $ **Help:** Total PO value at the agreed price. #### Deposit **Key:** deposit_pct **Type:** slider **Default:** 30 **Min:** 0 **Max:** 100 **Step:** 5 **Unit:** % **Help:** Share of the order paid before production. #### Tooling prepaid **Key:** tooling **Type:** number **Default:** 18500 **Min:** 0 **Step:** 500 **Unit:** $ **Help:** Tooling you have paid and not yet recovered or controlled. #### Production and ship lead time **Key:** lead_days **Type:** slider **Default:** 55 **Min:** 7 **Max:** 150 **Step:** 1 **Unit:** days **Help:** Days from deposit to shipment. #### Annual cost of capital **Key:** capital_rate **Type:** number **Default:** 10 **Min:** 0 **Step:** 0.5 **Unit:** % #### Chance of supplier failure or non-delivery **Key:** fail_prob **Type:** number **Default:** 3 **Min:** 0 **Max:** 100 **Step:** 0.5 **Unit:** % **Help:** Your own judgement based on supplier history. **Outputs:** #### Deposit paid **Key:** deposit **Expr:** order_value * deposit_pct / 100 **Format:** currency #### Cash at risk before shipment **Key:** at_risk **Expr:** deposit + tooling **Format:** currency **Primary:** true **Description:** Deposit plus tooling you could lose if the supplier fails. #### Exposure as share of order value **Key:** risk_ratio **Expr:** at_risk / order_value * 100 **Format:** percent #### Cost of capital while funds are tied up **Key:** carry **Expr:** at_risk * capital_rate / 100 * lead_days / 365 **Format:** currency #### Expected loss **Key:** exp_loss **Expr:** at_risk * fail_prob / 100 **Format:** currency **Description:** Exposure multiplied by your failure probability. #### Expected cost of this payment structure **Key:** total_cost **Expr:** carry + exp_loss **Format:** currency **Primary:** true #### Balance payable after inspection **Key:** balance **Expr:** order_value - deposit **Format:** currency **Chart:** #### Exposure and expected loss vs deposit percent **Type:** line **X:** deposit_pct **From:** 0 **To:** 100 **Steps:** 20 **Series:** - at_risk - exp_loss **Disclaimer:** A planning aid based on your own assumptions. The failure probability is a judgement, not a statistic. It does not replace credit checks, contracts, trade insurance or legal advice. ## Content **Intro:** Chinese factories commonly ask for a deposit before buying materials, and tooling is often paid up front. That money is unsecured until the goods ship. This calculator turns the deposit percentage, tooling and lead time into a cash-at-risk figure and an expected cost so you can compare payment structures. **Sections:** #### How to use the calculator **Body:** Enter the order value, the deposit percent you plan to pay and any tooling money that is not yet recovered. Add the number of days between deposit and shipment and your annual cost of capital. Then set the chance that the supplier fails, using a simple and honest estimate: low for a long-standing, audited factory, higher for a new one. The chart shows how exposure and expected loss grow as the deposit rises, so you can see what a lower deposit would save. #### The formulas **Body:** Cash at risk equals the deposit plus unrecovered tooling. Cost of capital equals cash at risk times the annual rate times lead days divided by 365. Expected loss equals cash at risk times the failure probability. The total expected cost adds the two. It ignores recovery from claims, trade insurance or tooling you can reclaim, so treat it as a conservative figure. The balance line shows the amount left to pay after inspection. **Bullets:** - At risk = deposit + tooling - Carry = at risk x rate x days / 365 - Expected loss = at risk x failure chance - Total = carry + expected loss #### Using the result **Body:** If the total expected cost is small compared with the price benefit of the supplier, the structure may be acceptable. If exposure exceeds 40 or 50 percent of order value, consider staged payments tied to milestones, a smaller deposit, a letter of credit or trade insurance, or paying part of the tooling after sample approval. Also compare the cost of a lower deposit against any price increase the factory asks for in return, since a factory may charge more for easier terms. #### Common mistakes **Body:** Many buyers count only the deposit and forget tooling, which can exceed the deposit on a small order. Others pay balances before inspection, adding the whole order to the exposure. Setting the failure chance to zero hides the problem, so use a realistic number. Do not forget currency risk if the invoice is in RMB, and check that bank details match the company name in the contract, since payment fraud through changed bank details is a known risk. **Cta:** If payment terms and supplier exposure should be visible in your ERP's open-PO and AP data, Netray can help build that view. **Faq:** #### What deposit is normal for a Chinese factory? **Answer:** Thirty percent deposit with the balance before shipment or against the bill of lading copy is a common starting point, but terms vary with order size, supplier history and whether materials are custom. Use the calculator to see how a change affects exposure. #### How do I choose the failure probability? **Answer:** Use a judgement based on audits, years of trading, payment history with other buyers and financial signals. A low single-digit percent might suit an established partner and a higher figure a new, unaudited supplier. It is an assumption, not a measured statistic. #### How can I reduce the exposure? **Answer:** Use milestone payments, pay the balance only after a passing inspection, tie tooling payments to sample approval, consider a letter of credit or trade credit insurance and write ownership and refund terms into the contract. #### Does this include freight and duty? **Answer:** No. It focuses on payment exposure only. Use a landed cost calculator for freight, duties and taxes. The two together give a fuller picture of what a sourcing decision costs. ## Search terms china supplier deposit risk, 30 percent deposit china supplier, advance payment risk calculator, prepayment exposure calculator, payment terms china sourcing, tt deposit balance before shipment --- Talk to an engineer: https://netray.co/contact?intent=erp_ai | Machine catalog: https://netray.co/agent/catalog.json