Debtor days (days sales outstanding); an average guide to the length of time it takes a company to receive payment for goods sold from a customer (debtor days). It is a measurement obtained by calculating the number of days sales that are owed to your company (or better know as debtor days calculation).

Generally lower debtor days numbers are better. Comparisons of debtor days for the same business over different periods of time are the most often used. Debtor days comparison of companies in different sectors are rarely meaningful as the differences are usually largely the result of the nature of different businesses.

Most businesses make a large proportion (or even all) of their sales on credit. Debtor days is a measure of the average time payment takes. Increases in debtor days may be a sign that the quality of a company's debtor is decreasing. This could mean a greater risk of defaults (so it does not get paid at all). Increasing debtor days could also be an indicator that cash flow is likely to weaken or that more working capital will be required.

Try our interactive debtor days calculator. It not only calculates how long your clients are taking to pay you but also the financial impact. You can easily model potential savings by reducing your collection period.

Want to know how much you could potentially release from your sales ledger? Use our calculator to find out.