Debtor days allow you to quickly access how long it takes for debtors to pay you. The formula is Debtors Outstanding X 365 / Annual Sales = Debtor Days.
Let’s say your annual sales are $2,000,000. Your debtors outstanding are $301,000. Therefore takes 55 days for your debtors to pay you.
Let’s say you are able to reduce your debtor days by 10 days to 45 days. This would free up $54,000 cash into the business.