![]() ![]() Like your debtors, your outstanding creditors figure is a moment in time and if you choose a time in the month when it is lower or higher than normal, it will affect the result.An increasing creditor days period could be the result of one or two suppliers that you are deferring payment on for good reason – perhaps you have a dispute. ![]() Are they likely to take action which might, at best, damage your reputation and, at worse, force you out of business Examine your creditors listing and decide if you might be pushing your luck with any of them.A large figure or increasing trend could be an indication that you are struggling to pay your bills on time.Īgain, it’s worth taking a look at the details of your creditors before jumping to any rapid conclusions about the results. Your creditor days are calculated as follows: Outstanding creditors x 365Īs before, the result should be at or near the average terms that your suppliers offer you. A long creditor days period means you are keeping your money in the bank for as long as possible, but be aware that you could be damaging your relationship with your suppliers – or even putting them under strain – which could result in them applying limitations to the credit they offer you in future. Your outstanding debtors figure is a moment in time and if you choose a time in the month to calculate it when it is lower or higher than normal, it will skew your result.Ĭreditor days is the opposite side of the coin and is the average amount of time you are taking to pay your suppliers.This doesn’t mean that you can’t carry on activity in the background to obtain payment and treat is as a recovery later on, but it will give you a truer picture of your collection processes. A long outstanding debt could be inflating your result and it might be time to consider writing this off in the books and getting the tax deduction for the bad and doubtful debt.Examine your debtors listing and decide if specific action is needed on these customers – do you need to get firmer with your collection methods, agree an element of payment in advance or put them onto a direct debiting arrangement? An increasing number of debtor days could be the result of one or two customers that are consistently late in paying.For example, if you offer 30 days credit as standard on your invoices, your days debtors calculation should come out at or near to 30 days. The result should be at or near your normal terms of trade. Your debtor days are calculated like this: Outstanding debtors x 365 Money held in their bank accounts when it should be in yours means you have to find the money for wages and other overheads from other sources. A long debtor days period will put strain on your cash flow as you are effectively acting as the bank to your customers. ![]() This is the average amount of time it takes you to collect payment from your customers. Here are four trends that you should look out for when thinking about making sure you have enough money to pay the bills as they fall due. Developing situations can catch you by surprise and not leave you enough time to sort them out properly. Being in business is like spinning plates and it can often be difficult to keep on top of everything that is going on. ![]()
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