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Business Finance

Treasury


Debtor Collection Period Tool

Calculate the time it takes you to collect payment following a credit sale.

Debtor Collection Period =
(Debtors x 365)/Credit Sales:

Debtors:
Credit Sales:

Why is Debtor Collection Period useful?

Use this ratio to determine how long your company's money is tied up in customer credit. It facilitates analysis of the collection of accounts receivable, which may not always be the same as the credit terms which you have issued to customers. By considering your credit terms you can assess the 'quality' of these receivables.


Performance Ratios

The Debtor Collection Period is a 'performance ratio', which means that it indicates the efficiency of a business. Efficiency and performance are linked, as efficient businesses are usually more profitable.


Benchmark Result

Each industry has an average collection period, but generally 10 to 15 days over the extended credit term should cause concern.

This ratio gives you one insight into your business. To determine the full financial performance of your business, you will also need to analyse your financial statements and calculate the other financial ratios.


Tips for finding figures

  • Debtors are Trade Debtors or Accounts Receivable are found in the Balance Sheet.
  • Sales are found in your Profit and Loss Account. Cash sales should be excluded in this computation.



Note: This information is provided for illustrative purposes only and is based on the accuracy of information provided. It does not constitute a contract. We are not recording and will not use the information quoted by you in our calculators unless it is being used as part of a product application.



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