The Debtor Days KPI is a measurement of the credit activity within the Service Department. Its purpose is to inform you of the average number of days that your customers take to pay you.
Example:
A) Service Debtors = R80,416 B) Service Daily Credit Turnover* = R1,870 C) Debtor Days = 43 days (A ÷ B)
Note: In order to calculate the Service Daily Turnover, you will need to take the annualised Service Turnover sold on credit and divide that figure by 365 to arrive at a daily sales turnover.
A) Annual Turnover On Credit = R682,550 B) Days in 1 year = 365 C) Service Daily Credit Turnover = R1,870 (A ÷ B)
Discussion:
In the example provided above the average amount of debt is outstanding for a period of 45 days, In many cases, customer credit agreements are for 30 days and all too often these credit terms are not fully instigated and your money is outstanding for longer periods of time. The question is how much longer.