Cash flow and debtor days

Cash flow and debtor days

Cash flow and debtor days

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.

 

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