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Debtor Days

Debtor Days is a metric that calculates the average number of days it takes a company to collect payments from its debtors (customers) for credit sales. It is similar to the debtor collection period and is used to assess how quickly a company converts accounts receivable into cash. A lower debtor days figure indicates that the company collects payments more efficiently, improving its liquidity.

Example

A company with debtor days of 25 means it takes an average of 25 days to collect payment from its customers after a credit sale.

Key points

• Debtor days measure the average time it takes for a company to collect payments from customers.

• Lower debtor days indicate more efficient payment collection and better liquidity management.

• The metric is important for managing cash flow and accounts receivable.

Quick Answers to Curious Questions

Both metrics measure the same concept (average time to collect payments), but debtor days is more commonly used in some industries, while debtor collection period is a broader term.

A company can reduce debtor days by offering incentives for early payments, improving invoicing processes, or using stricter credit policies.

Term: Debtor Days