In
accounting
Accounting, also known as accountancy, is the measurement, processing, and communication of financial and non financial information about economic entities such as businesses and corporations. Accounting, which has been called the "languag ...
the term Debtor Collection Period indicates the average time taken to collect trade
debts. In other words, a reducing period of time is an indicator of increasing efficiency. It enables the enterprise to compare the real collection period with the granted/theoretical credit period.
: Debtor Collection Period = ×
: (average debtors = debtors at the beginning of the year + debtors at the end of the year, divided by 2 or Debtors + Bills Receivables)
Credit Sales are all sales made on credit (i.e. excluding cash sales) A long debtors collection period is an indication of slow or late payments by debtors.
The multiplier may be changed to 12 (for months) or 52 (for weeks) if appropriate.
See also
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Receivables turnover ratio
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Cash flow
A cash flow is a real or virtual movement of money:
*a cash flow in its narrow sense is a payment (in a currency), especially from one central bank account to another; the term 'cash flow' is mostly used to describe payments that are expected ...
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Debtor days The debtors days ratio measures how quickly cash is being collected from debtors. The longer it takes for a company to collect, the greater the number of debtors days.
Debtor days can also be referred to as debtor collection period
In accounting ...
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Working capital
References
Financial ratios
Working capital management
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