Debtor days

Also called Days sales outstanding, DSO, Aged debtors

How long, on average, your customers actually take to pay you — which is rarely the number on your invoice.

What it means

Debtor days is the average number of days between raising an invoice and the money arriving. Your terms might say 30 days; your debtor days figure tells you what actually happens.

The rough calculation: (money owed to you ÷ annual sales) × 365.

Why it matters

It is a direct multiplier on how much cash your business needs. Cutting debtor days from 60 to 40 on £500,000 of annual sales releases around £27,000 of cash, permanently, without selling anything extra.

It is also the earliest reliable warning of a customer in trouble. People stop paying before they stop ordering.

What it looks like in practice

Run an aged debtors report monthly — every bookkeeping package produces one. Chase at seven days overdue, not thirty; the first polite call is the one that works.

Ask for a purchase order number up front, invoice the day the work is done rather than at month end, and put the bank details on the invoice.

The Late Payment of Commercial Debts legislation gives you a statutory right to interest and a fixed recovery cost on overdue business invoices. Most businesses never use it, and mentioning that it exists is often enough.

What to watch out for

Large customers with long standard terms who treat your invoice as free credit. That is a real cost and belongs in the price.

Not invoicing promptly. A surprising share of debtor days is added at your end, before the invoice ever leaves.

Where to get proper advice

GOV.UK sets out the statutory late-payment rules. A bookkeeper will usually take credit control on for a modest fee and it pays for itself.