Quick answer
Debtor days is the average number of days your customers take to pay you. Divide trade debtors by annual sales and multiply by 365. If you invoice on 30-day terms and your figure is 55, customers are paying around 25 days late on average. Lenders, especially invoice financiers, use it to judge collection risk and how much cash is locked up in unpaid invoices.
Key points
- Debtor days = trade debtors ÷ annual sales × 365
- Strip GST from the debtors figure if your sales figure excludes it, or the answer runs about 10% high
- Each day cut from the figure frees roughly one day's sales in cash
- Large Australian businesses report their payment times to small suppliers on a public register
Your invoices say “30 days”. Debtor days tells you what your customers actually do. It turns the unpaid invoices sitting in your debtors ledger into one number that a lender, an accountant or you can track month by month.
How do you calculate debtor days?
The standard formula:
Debtor days = trade debtors ÷ annual sales × 365
Trade debtors is the total of unpaid customer invoices on a given date. Annual sales is revenue for the past twelve months. For a monthly view, divide by the month’s sales and multiply by the number of days in it.
The GST trap most owners fall into
Australian invoices to customers include GST, so the debtors balance in your books includes it too. Your profit and loss shows sales without GST. Divide one by the other and the result runs about 10% higher than reality.
The fix is easy: divide the debtors balance by 1.1 first (if all your sales carry GST), or take sales including GST from your BAS. Lenders who know what they’re doing will make this adjustment, but it’s better to present the correct figure yourself.
Worked example: a Newcastle wholesaler
A food wholesaler sells $1.3m a year excluding GST, invoices on 30-day terms, and has $286,000 of trade debtors on its books.
| Step | Figure |
|---|---|
| Unadjusted: $286,000 ÷ $1,300,000 × 365 | 80 days |
| Remove GST: $286,000 ÷ 1.1 | $260,000 |
| Adjusted: $260,000 ÷ $1,300,000 × 365 | 73 days |
| Average lateness against 30-day terms | about 43 days |
The more useful number is what speed is worth. One day of sales is $1.3m ÷ 365, about $3,560. Bring collection from 73 days down to 60 and roughly $46,000 comes back into the bank account, with no loan required. If the gap can’t be closed quickly, try the cash flow gap calculator to size the funding needed in the meantime.
Tired of waiting on customers to fund the next order? Tell us about your receivables and we’ll suggest a way to bridge them.
What does the national data say?
Slow payment isn’t just you. Big companies covered by the Payment Times Reporting Scheme file twice-yearly reports on how they treat their small suppliers. In its February 2026 update, the regulator said that for the January to June 2025 period, getting through 95% of small business bills took big payers an average of 64 days, up from 58 a cycle earlier. Those reports sit on a public register, which makes it worth searching for a large client’s name before you sign up to its terms.
How lenders use your figure
- Banks and unsecured lenders read high or rising debtor days as a strain on working capital and may size a loan more cautiously.
- Invoice financiers look at the aged receivables behind the figure. Invoices beyond a set age, often 90 days, usually can’t be funded.
- Everyone looks at the trend. Debtor days creeping up three quarters in a row is a bigger worry than one high month.
When collections are structurally slow, as in construction or government supply, invoice finance can turn invoices into cash within a day or two of issuing them. The invoice finance calculator estimates the cost in dollars.
Waiting to be paid shouldn’t stall the business
Once you know your number, the next question is what to do about it. Tell us your sales, your terms and what your customers really take. The form asks for very little, roughly a minute’s worth, and there’s no credit enquiry involved in sending it. Rather than becoming a sales lead for a dozen companies, your details are read by one specialist who then calls you. Give us figures straight from your ledger so the first suggestion fits.
Frequently asked questions
What's a good number of debtor days?
Compare it with your own payment terms first. A figure close to your terms means customers pay on time. Many small businesses aim to stay within about ten days of their stated terms, but industries differ: construction and government work typically run longer than retail or hospitality.
Is debtor days the same as DSO?
Yes. Days sales outstanding is the term used in larger companies and US-based software. Debtor days and DSO use the same calculation.
Should I use year-end or average debtors?
If your business is seasonal, use an average of the monthly balances. A year-end figure taken at a quiet time of year can make collections look better than they really are.
Why do lenders care about debtor days?
It shows how much working capital the business needs and how reliably invoices turn into cash. Invoice financiers also use it to set how long an invoice can be outstanding and still be funded.
How can I check how quickly a big customer pays?
Large businesses covered by the Payment Times Reporting Scheme publish their small business payment times on a public register at paymenttimes.gov.au, which is worth searching before agreeing terms with a new major client.