Debtor days calculator
Debtor days shows roughly how long your customers take to pay, by comparing what they owe you with what you sell on credit. Enter your trade debtors, credit sales and the days in the period to see your debtor days and how much cash you would free up by reaching a target.
Debtor days from your accounts
Each debtor day ties up one day's credit sales.
Count-back method (last three months)
No answer means customers owe more than three months' sales: count further back by hand.
In the US the same measure is called days sales outstanding (DSO). The second calculator uses the count-back method, which gives a truer answer when recent months were busier or quieter than the rest of the year.
How to calculate debtor days
Divide trade debtors by credit sales for the period, then multiply by the number of days in it:
Debtor days = trade debtors ÷ credit sales × days in the period
For a year, use a full year's credit sales and 365. For a quarter or a month, use that period's sales and its own number of days. Trade debtors is what customers owe you for goods and services at the end of the period, the same total as your aged debtors report. Leave out other debtors such as prepayments and staff loans.
Keep VAT consistent. If you're VAT-registered, sales in your accounts exclude VAT but the amounts customers owe include it. If all your sales are standard-rated at 20%, divide debtors by 1.2 before using them, or the answer comes out a fifth too high.
Worked example
A fictional 30-person packaging distributor sells to retailers on 30-day terms. In the year to 30 September its credit sales were £1,450,000, all standard-rated. Customers owed £223,200 including VAT, which is £186,000 without it.
Credit sales per day are £1,450,000 ÷ 365 = £3,973, and £186,000 ÷ £3,973 = 46.8, or about 47 debtor days. On 30-day terms, customers are taking about 17 days longer than agreed, on average. Getting back to 35 days would release about £46,959 of cash.
Sales climb each autumn as retailers stock up, though: £110,000 in July, £120,000 in August and £140,000 in September. Counting back, September's sales cover £140,000 of the debt (30 days), and the other £46,000 is 46 ÷ 120 of August, or 11.9 of its 31 days. That's 41.9, about 42 days: five fewer than the annual method gives, because what's owed comes from the busiest months. These are the starting figures in both calculators.
The count-back method
The standard formula assumes sales are spread evenly through the year. The count-back method works backwards from the period end instead:
- Start with trade debtors at the month end.
- Take away the latest month's sales and count all of that month's days.
- Repeat with the month before, and the one before that, until what's left is smaller than a month's sales.
- For that last month, count the same fraction of its days as the fraction of its sales still owed.
Because it uses recent trading, a busy or quiet spell doesn't distort the answer the way it does when you divide by a full year's sales.
How to read the answer
- Against your terms. The gap between debtor days and your standard terms is the average delay you're financing.
- As a trend. Work it out the same way every month. A steady rise is an early warning that cash will tighten.
- In pounds. Each debtor day holds one day's credit sales: about £3,973 in the example.
- Customer by customer. An average hides the detail, so use the aged debtors list in your management accounts to see which accounts drive it. For large UK customers, GOV.UK's payment practices service shows how long they take to pay suppliers on average.
Common mistakes
- Mixing VAT-inclusive debtors with VAT-exclusive sales.
- Including cash sales, which nobody owes you, so the answer looks better than it is.
- Using a year's sales against a peak-season balance. Use the count-back method instead.
- Letting a few very old invoices hide in the average. Two disputed invoices from last year can add days while everyone else pays on time.
- Chasing the average instead of the oldest debts.
Frequently asked questions
Is debtor days the same as DSO?
Yes. Days sales outstanding (DSO) is the US name for the same calculation. Some companies use average debtors over the period rather than the closing figure, so check which version a number uses before comparing.
What is a good debtor days figure?
One close to your own payment terms. If you invoice on 30 days and debtor days sit at 32, customers pay roughly on time; at 50, you're funding about three weeks of delay. Compare with your own trend rather than another company's figure, because terms and customers differ.
How can we reduce debtor days?
Invoice on the day you deliver, show the due date clearly, chase before it falls due and agree shorter terms with new customers. If the customer is a UK business, you can also claim statutory interest when it pays late: the late payment interest calculator works it out.
How is debtor days different from creditor days?
Debtor days measures how long customers take to pay you. Creditor days does the same for what you owe suppliers, using trade creditors and purchases. Together with stock, they decide how much cash your working capital ties up.