Debtor Days Calculator
If you're looking into debtor days, it means you might be dealing with a problem where,
- It takes a long time for your buyers to pay you
- Trying to understand what is the average number of days your clients take to pay you.
- Looking for ways to get paid more quickly.
....and this can affect the cash you have available for your business.
This article will help you understand what debtor days are, and how to figure them out, complemented by our calculator for swift assessment and ways to get paid faster.
Debtor days, also known as 'days sales outstanding' or DSO, gauge the average time customers take to pay. High debtor days strain cash flow, limiting funds for business growth.
A shorter debtor period translates to faster payments, providing more capital for scaling.
Periodic calculation, monthly, quarterly, or yearly, involves determining accounts receivables, and total credit sales, and multiplying the ratio by the days in the period (Accounts receivables ÷ credit sales) x 365 = debtor days.
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Optimal debtor days vary by industry, with a general target of keeping them under 45. Rising debtor days across industries in recent years signal potential insolvency risks for businesses.
If your debtor days are going up, it's a bit worrying because it might mean more businesses are having trouble. Getting paid faster is important because every day that someone is late paying you, it's like losing money from your bank account.
Here are some simple ways to get paid faster:
1. Transparent Payment Discussions:
- Initiate upfront discussions with customers about payment terms, billing, and project stages to enhance clarity.
- Be clear about when you expect to get paid.
2. Prompt Invoicing with Automation:
- Utilize accounting tools like Briger, Xero, or Sage for automated and timely invoicing, ensuring clients perceive the importance of prompt payments. Use tools that can automatically send them for you.
3. Effective Invoice Reminder Workflow:
- Remind your customers to pay with friendly messages before and after the payment is due, with automation using platforms like Bridger.
4. Smart Invoicing Timing:
- Stand out by invoicing promptly after completing a job to avoid the overwhelming effect of mass reminders on specific days.
To simplify complex processes, Bridger offers a full-stack solution, automating late payment fee calculations and providing a user-friendly interface for efficient workflows.
5. Account Receivables expert as a service:
- Use an Outsourced A/R expert to make soft reminder calls on your behalf before the due date. Saving you money by reducing your A/R team size and leaving your internal finance team to focus on only over-due payments.
6. Credit Risk and Limits:
- Mitigate risks of late payments by utilizing Bridger's Credit risk Insights. Conduct credit searches and reports before engaging with clients to determine their creditworthiness and recommended credit limits.
To simplify all these complex processes, Bridger offers a full-stack solution, automating Invoicing and reminders, providing you an outsourced A/R Expert at a fraction of the cost, along with a user-friendly interface for efficient workflows.
If things get complicated, tools like Bridger can help by automating some of these processes. They can also give you insights into your customers' credit and help you make good decisions about working with them; Automated Payment Reconciliation along with an A/R dashboard to have a full view of your receivables standing.
In tough times, it's super important to focus on getting paid quickly. Try out Bridger's tools for free to see how they can help you manage your money better.