1. What is Average Debtor Days?

Average Debtor Days is a financial metric that calculates the average number of days it takes for a company to collect payment from its debtors on a monthly basis. It helps businesses monitor their accounts receivable efficiency.

2. How Does the Calculator Work?

The calculator uses the simple formula:

Where:

• \( \text{Sum(Days)} \) — Total debtor days over the period
• \( \text{Months} \) — Number of months in the period

Explanation: This calculation provides the monthly average of debtor days, helping businesses track collection efficiency over time.

3. Importance of Average Debtor Days Calculation

Details: Monitoring average debtor days helps businesses identify trends in accounts receivable, improve cash flow management, and optimize credit policies for better financial health.

4. Using the Calculator

Tips: Enter the total debtor days and the number of months in the period. Both values must be valid (days ≥ 0, months ≥ 1).

5. Frequently Asked Questions (FAQ)

Q1: What is a good average debtor days value?
A: Ideal values vary by industry, but generally lower numbers indicate more efficient collections. Compare against industry benchmarks for context.

Q2: How often should I calculate average debtor days?
A: Monthly calculation is recommended to track trends and identify potential collection issues early.

Q3: What if my debtor days are increasing?
A: Increasing trends may indicate issues with credit policies, collection processes, or customer payment behavior that need addressing.

Q4: Can this metric be used for seasonal businesses?
A: Yes, but consider calculating separate averages for different seasons to get meaningful insights.

Q5: How does this relate to cash flow management?
A: Lower average debtor days generally mean faster cash conversion, improving liquidity and reducing working capital requirements.