How Debtor days can impact your cash flow

Where are you now?

The best place to start is understanding what your debtor days are currently then sit back and have a think about your cash flow situation, do you always have enough cash to make payments and wages on time?

Calculating your debtor days

The key things we need to know before we work out the debtor

days are total sales for the month, closing debtor balance, how many days were in the month.

So, lets say total sales were $60,000

Closing debtor balance was $33,000

And we are measuring this based on July, having 31 days

Debtor days = Debtors / Average daily sales

Average daily sales = Debtors / (sales / 31)

33,000 / (60,000/31) = 17.05 Days

Identifying opportunity for improvement

Once we understand where we are, we can identify where the weakness is in the system and implement strategies to improve this number. Having a number, we can track makes it easy for us to know if we are making improvements.

The next video in this series is: The Art of Chasing Money