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