What Are Creditor Days and How Do You Calculate Them?
Creditor days measure the average number of days your business takes to pay its suppliers after receiving their invoices. The formula is accounts payable divided by credit purchases, multiplied by the number of days in the period. It's the mirror image of the debtor days your suppliers measure about you.
What Creditor Days Means
Creditor days (also called payables days, or days payable outstanding) is the average time between a supplier invoicing you and you actually paying that invoice, expressed as one number across all your suppliers. It isn't the payment term your suppliers give you — a business on 20th-of-the-month-following terms that regularly pays in the first week of the second month has creditor days well above what those terms imply.
The number matters in two directions. Too low, and you're paying earlier than you need to, using cash that could have stayed in the business a little longer. Too high, and you're probably paying late, which is exactly the behaviour that gets trade accounts put on stop.
The Formula
Creditor Days = (Accounts Payable ÷ Credit Purchases) × Number of Days in the Period
Accounts payable is the total of unpaid supplier invoices at the end of the period. Credit purchases is everything you bought on account (not cash or card purchases) over the same period. Many businesses use cost of sales instead of credit purchases because it's easier to pull from the profit and loss report; that's fine as long as you use the same figure every time you calculate it, so the trend stays comparable.
Worked Example
Example: a Tauranga café group buys $240,000 of stock and supplies on account over a 90-day quarter. At the end of the quarter, $96,000 of supplier invoices are still unpaid.
Creditor days = ($96,000 ÷ $240,000) × 90 = 36 days.
If most of those suppliers are on 20th-of-the-month-following terms (which works out at roughly 35–50 days from invoice depending on when in the month you buy), 36 days says the business is paying on time. If the same calculation came out at 60, it would mean a meaningful share of invoices are going past their due dates.
| Unpaid at quarter end | Credit purchases (90 days) | Creditor days | What it suggests |
|---|---|---|---|
| $48,000 | $240,000 | 18 | Paying well ahead of most NZ trade terms |
| $96,000 | $240,000 | 36 | In line with 20th-of-the-month-following terms |
| $160,000 | $240,000 | 60 | Likely paying late on a share of invoices |
Creditor Days vs Debtor Days
| Creditor days | Debtor days | |
|---|---|---|
| Measures | How long you take to pay suppliers | How long your customers take to pay you |
| Based on | Accounts payable | Accounts receivable |
| Higher number means | Cash stays in your business longer | Cash comes in more slowly |
| Risk if too high | Supplier relationships, account on stop | Cash shortfall, bad debts |
The two are worth reading together. If your debtor days are 50 and your creditor days are 30, you're paying suppliers about 20 days before your own customers pay you, and that gap has to be funded from somewhere. See what debtor days are and how to calculate them, and accounts payable vs accounts receivable for how the two sides fit together.
What's a Healthy Number?
There's no single right figure, because it depends on the terms your suppliers actually give you. A useful test: your creditor days should sit close to the average term across your suppliers. Well below it, and you could hold onto cash longer without harming anyone. Well above it, and you're relying on suppliers' patience. For how far to push that, see how many days you should take to pay suppliers.
Frequently Asked Questions
Is creditor days the same as DPO?
Yes. Days payable outstanding (DPO) is the name more common in US and corporate finance writing; creditor days is the term most NZ and UK accountants use. The calculation is the same. See what DPO means.
Is a higher creditor days number good or bad?
Up to a point it's good, because cash stays in your business longer. Once it climbs past the terms your suppliers have agreed to, it means you're paying late, which can cost you credit limits, early payment discounts or the account itself.
Should I use cost of sales or purchases in the formula?
Credit purchases is the more accurate figure, because cost of sales includes items you didn't buy on account. Cost of sales is easier to find and is fine for tracking a trend, as long as you use the same figure every time.
How do I find accounts payable in Xero?
Run the Aged Payables Summary report. The total at the bottom is your accounts payable at that date, and the column breakdown shows how much of it is already overdue.
What can I do if my creditor days are too high?
Talk to the suppliers you owe most before they chase you, agree a payment date, and look at whether large invoices can be split into instalments so the supplier is still paid in full on time while your outgoing cash is spread over several months.
