What Are Debtor Days and How Do You Calculate Them?
Debtor days measure the average number of days it takes customers to pay an invoice after it's issued. A lower number means cash comes in faster; a rising number is usually the first sign that a business's cash flow is about to get tighter.
What Debtor Days Means
Debtor days (also called days sales outstanding) is the average time between issuing an invoice and actually being paid for it, expressed as a single number of days across all your customers. It isn't the payment term you offer — a business offering Net 30 but chasing most invoices to day 45 has debtor days of roughly 45, not 30. The gap between the two is exactly what the number is designed to surface.
The Formula
Debtor Days = (Accounts Receivable ÷ Total Credit Sales) × Number of Days in the Period
Accounts receivable is the total value of unpaid invoices at a point in time. Total credit sales is the value of everything invoiced (not cash sales) over the same period you're measuring — a month, a quarter, or a year. Multiplying by the number of days in that period converts the ratio into a day count that's easy to compare over time.
Worked Example
Example: a Hamilton building-materials wholesaler invoices $450,000 of credit sales in a 90-day quarter. At the end of that quarter, $90,000 of invoices are still unpaid.
Debtor days = ($90,000 ÷ $450,000) × 90 = 18 days.
That's a healthy result for a supplier offering 20th-of-the-month-following terms — most customers are paying close to on time. If the same business's unpaid balance crept up to $180,000, debtor days would jump to 36, even with no change in sales volume, which is the kind of shift worth investigating before it compounds.
What's Considered Good?
As a rough guide, debtor days close to or slightly above your stated payment term is healthy; a number meaningfully higher than your terms signals collection problems rather than a cash-flow issue on its own. See what's a good debtor days number for an NZ small business for benchmark ranges by industry.
How Debtor Days Affects Cash Flow
Every day added to debtor days is a day your own cash is effectively funding your customer's purchase, on top of whatever you've already spent on materials, wages and freight for that job. See how late invoice payments affect supplier cash flow, and how payment terms affect the cash conversion cycle.
Frequently Asked Questions
Is a lower debtor days number always better?
Generally yes, but not if it comes from terms so tight they cost you sales. The goal is debtor days close to your stated terms, not the lowest possible number regardless of what you offer customers.
How often should I calculate debtor days?
Monthly is typical for a small or medium business, using a rolling 90-day sales figure to smooth out seasonal swings. Calculating it only annually usually means problems are caught too late to act on.
What's the difference between debtor days and an aging report?
Debtor days is one summary number for your whole ledger. An aging report breaks the same unpaid balance down by how overdue each invoice is — see how to read an accounts receivable aging report.
Does Xero calculate debtor days for me?
Xero doesn't surface debtor days as a single figure by default, but the accounts receivable aging summary report gives you the numbers needed to calculate it, and some add-on reporting tools do show it directly.
Can offering instalments change my debtor days?
Yes. Where PaidTerms pays a supplier upfront and collects the instalments itself, the invoice is effectively settled on day one from the supplier's side, which removes it from accounts receivable entirely rather than just shortening how long it sits there.
Stop Waiting on the Days You're Counting
PaidTerms pays suppliers the full invoice upfront, while the customer repays in instalments — the invoice leaves your debtor days the moment it's issued.
Read next: what's a good debtor days number for an NZ small business.
