Business Glossary
What Are Debtor Days?
Debtor days (also called Days Sales Outstanding or DSO) measures the average number of days it takes your customers to pay you after you've invoiced them.
The Formula
Debtor days = (Outstanding debtors ÷ Annual revenue) × 365
Worked Example — UK SME
A business invoices £10,000 per month. If outstanding debtors total £14,000, debtor days = (14,000 ÷ 120,000) × 365 = 42.6 days.
UK Benchmark
📊 Most UK SMEs should target 30–35 debtor days. Above 45 days is a warning sign — cash is being trapped in unpaid invoices.
Common Questions
Why do debtor days matter for UK SMEs?
High debtor days mean cash is tied up in invoices you've already earned but haven't collected. This creates cashflow pressure even when the business is profitable — one of the most common causes of SME cash crises in the UK.
What is a good debtor days figure for a UK SME?
35 days or fewer is the target for most UK SMEs. Service businesses often achieve 28–35 days. Distribution and manufacturing businesses with trade credit typically run 35–50 days. Above 60 days is a significant commercial risk.
How do I reduce my debtor days?
Invoice immediately on delivery or completion. Send automated reminders 3 days before due date. Chase on the due date — every time, without exception. Consider offering 1–2% early payment discounts for key accounts. Review payment terms and move new customers to 14-day terms where possible.
Calculate this for your own business
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