Glossary · UK
What is Creditor Days?
The average number of days a business takes to pay its own suppliers, calculated from trade payables and annual purchases, used alongside debtor days to assess working capital efficiency.
Full Definition
Creditor days (also called Days Payable Outstanding) measures how long, on average, a business takes to pay its suppliers, calculated as trade payables divided by annual credit purchases (or cost of sales), multiplied by 365. Taking longer to pay suppliers -- within agreed terms -- effectively lets a business use supplier credit as a source of free working capital, improving cash flow, but stretching payments beyond agreed terms can damage supplier relationships, risk the loss of early payment discounts, and in some sectors trigger late payment interest and compensation under the Late Payment of Commercial Debts (Interest) Act 1998. Larger companies in the UK are required to report their payment practices twice yearly under the Reporting on Payment Practices and Performance Regulations, partly in response to concerns about large businesses using extended payment terms to fund their own working capital at smaller suppliers' expense. Creditor days is most useful read alongside debtor days and stock (inventory) days as part of the cash conversion cycle, which together show how many days, net, a business's cash is tied up in the gap between paying suppliers and collecting from customers -- a shorter or negative cash conversion cycle generally means the business needs less external working capital finance to fund its trading operations.