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The debtor days formula is an important indicator of your company’s cash flow health. It provides insight into how long, on average, you must wait before customers settle their invoices.
In this article, we’ll explain what the debtor days formula is, how to calculate debtor days, and how to reduce your collection time with practical strategies.
Table of contents:
The term debtor days refers to the average number of days it takes for customers to pay their outstanding invoices. It’s a widely used performance indicator in finance departments, among accountants and business owners, to monitor how well receivables are being managed.
This period is also known as average debtor days, or as the result of applying the debtor turnover days formula. A shorter timeframe means faster access to working capital. A longer period may indicate poor credit control or collection inefficiencies.
Accurate debtor days calculation helps you act early when customers delay payments. The standard debtor days formula is:
Debtor Days = (Average Trade Debtors / Credit Sales) × 365
Example:
Let’s say your average trade debtors total £50,000, and your annual credit sales amount to £300,000.
Then your debtor days calc would be: (£50,000 / £300,000) × 365 = 60.83 days
In this case, your debtor days ratio is 61 days – meaning you wait approximately two months for payment. This is a key financial KPI that should be tracked regularly, either annually or via a debtor days calculation monthly, depending on your reporting cycle. Some companies also use the count back method debtor days for a more dynamic view.
Reducing your debtor days has clear advantages:
In many industries, a debtor days figure between 30 and 45 is considered healthy. If your business consistently exceeds this range, it may be time to review your internal processes.
From the first client interaction, be transparent about your payment terms. Include them clearly in all quotations and invoices.
Fast and error-free invoicing helps avoid unnecessary delays. Use automatic reminders to reduce your debtor days and encourage timely payments.
Regular reports help you track overdue payments and identify trends in customer payment behaviour, allowing for timely intervention.
Consider offering discounts for early payment. This small financial incentive can have a positive impact on your collection cycle.
Prevention is better than cure. Before taking on a new client, perform a creditworthiness check to reduce the risk of non-payment.
Manually chasing invoices, calling customers, and checking payments can be time-consuming. With Payt, you automate the entire accounts receivable process—from invoicing to follow-up.
You’ll save time and reduce your debtor days by 30% to 50%. Our cloud-based software sends timely reminders, enables online payments, and keeps you informed via real-time dashboards. You stay in control—Payt handles the rest.
Interested in the benefits of Payt? Download our brochure below or schedule a demo right away.
This varies by industry, but between 30 and 45 days is typically seen as healthy.
Set clear payment terms, automate your invoicing, and keep close track of outstanding debts. Software like Payt can simplify the process.
Payment terms are the agreed number of days a customer has to pay. Debtor days measure how long, on average, it actually takes for payment to be received.
You’ll save time, reduce manual errors, and collect payments faster—while maintaining better oversight and improving customer satisfaction.
The debtor balance is the total value of unpaid customer invoices at a specific point in time.
Example:
On 1 September, if you have £25,000 in open invoices that have not yet reached their payment deadline, your debtor balance is £25,000.
