Debtors Days Explained – Video
A quick Dolman Bateman Business Tip. Debtors Days is an important accounting ratio and key performance indicator (KPI) that provides you with an easy to understand statistic of how many days your debtors are outstanding.
So the quick calculation is trade debtors divided by sales x number of days eg 365. If you are measuring annual sales then the number of days is 365. If you are measuring monthly sales then the number of days is 30.
Typically a business with 30 day credit terms will have around debtors days of around 45. As a business owner, the objective is to reduce your debtors days over time working at systems and processes to enable the reduction.
As an extra task, what would have to change in your business, what systems would you have to change, what payment policies, what products and services to reduce your debtors days to zero.
I would love to hear how you have reduced or thought about reducing your debtors days, leave a comment below and we will definitely reply.