Some people see debtor days as a burden, but did you know there are actually some benefits attached to debtor days? In fact, debtor days can actually increase your financial strength, if you utilise them appropriately. If you are unsure of the benefits of debtor days, we are here to help. Read this guide about how debtor days can increase your financial strength and succeed in the business world like never before.
What are Debtor Days?
If you are unsure what debtor days are, don’t worry. There are many aspects of the business world that you need to get your head around to succeed. Businesses use debtor days, or debt days, to appropriately figure how long it takes to pay their suppliers back for the stock, which is known as creditor days. A thriving business will use both debtor and creditor days in order to calculate the working capital cycles as well as the amount of cash flow that is required to trade in the meantime.
The number of debtor days is not set in stone. Each and every business will set their own payment terms. If the debtor days are too long, this can cause issues down the line. For example, a £300 loan does not need to be paid back at the same rate by every business, depending on different factors.
How are Debtor Day Calculations Made
Each business will decide upon its own debtor day payment terms, which is a definite benefit. Being able to manage the debtor day repayment period yourself puts you in control. This will usually depend on a number of varying factors such as the size of the company, whether early discounts are on offer, if there are any invoice errors such as rejections, elongating the process, as well as what industry you work within.
Benefits of Lowering Your Debtor Days
Any thriving business, no matter the industry or sector will look to lower their debtor days. This is for a wide array of reasons. Lowering debtor days can give you the opportunity to upgrade your technology and improve efficiency. This will allow you to optimise performance at work while streamlining processes such as project and task management client intake processes and billing solutions.
Other benefits can include the ability to invest in marketing while bringing in more potential clients. This will allow you capitalise on increased cashflow while redistributing your finances so you can establish the goals you intend to. The final benefit of lowering debtor days for your business is that you will have the ability to hire larger amounts of staff.
As many of the smaller firms out there do not have the resources to make time for the approach where they can adopt better practices when it comes to management and hiring, you can actually do this yourself with the decrease of debtor day.
If you consider all of the above, you will eb able to use debtor days as a positive element within your business model and thrive like never before in your working environment.