Debtor days is the number of days of sales sitting in your bank account as somebody else's promise. Work out yours, then compare it against how quickly large companies in the sector you sell into actually pay their suppliers.
The total owed to you by customers right now. Bottom of your aged debtor report.
Credit sales only. Exclude cash sales.
Median is drawn from UK payment practices reporting.
What your invoices say. The gap between this and your actual debtor days is the interesting number.
Debtor days, also called DSO or days sales outstanding, is your trade debtors divided by revenue for the period, multiplied by the number of days in that period. A business turning over £1.2m a year with £185,000 owed to it has debtor days of about 56 - nearly two months of sales it has delivered but not been paid for.
Use credit sales only. If a chunk of your revenue is paid at the point of sale, including it flatters the figure and hides the problem in the half of the business that actually has one.
An engineering firm on 60-day terms with 68 debtor days is running a tighter ledger than a consultancy on 14-day terms with 41. The absolute figure tells you how much cash is tied up; the gap between your terms and your actual collection tells you whether the problem is your pricing of credit or your enforcement of it.
A gap under 10 days is normal friction - invoices sent late, approvals, payment runs. A gap over 25 days usually means one of three things: your invoices are being disputed and nobody is telling you, your customer's payment run does not align with your due dates, or you have stopped chasing.
| Lever | Typical effect |
|---|---|
| Invoicing on completion rather than month-end | Up to 15 days |
| Getting a PO number and the right contact before you start | 5–10 days |
| Chasing at day 7, not day 45 | 10–20 days |
| Aligning due dates with the customer's payment run | 5–15 days |
| Shortening stated terms without enforcement | None |
The last row is the one businesses reach for first and it does nothing. Cutting stated terms from 30 days to 14 on a customer who pays in 55 gets you a customer who pays in 55.