Glossary · UK
What is Debtor Days?
The average number of days a business takes to collect payment from its customers after issuing an invoice, used to measure how efficiently it converts sales into cash.
Full Definition
Debtor days (also called Days Sales Outstanding or receivable days) measures, on average, how many days it takes a business to collect cash from customers after a sale is invoiced, calculated as trade receivables divided by annual credit sales, multiplied by 365. A rising debtor days figure over time can signal that customers are taking longer to pay, that credit control has become less effective, or that the business has extended more generous payment terms to win sales -- any of which can strain cash flow even if the business is profitable on paper, because profit recognised in the accounts has not yet turned into cash in the bank. Debtor days is watched particularly closely by lenders assessing invoice finance or working capital facilities, and by business owners managing growth, since rapid revenue growth funded on extended customer credit terms can create a cash flow trap where the business runs out of money to pay its own suppliers and staff even while sales are rising. Comparing debtor days against agreed customer payment terms (for example 30 or 60 days) helps identify whether collections performance matches policy, and comparing it against creditor days shows whether the business is, on balance, a net lender or net borrower of working capital to its trading cycle.