The Debtor Days KPI is a measurement of the credit activity within the Parts Department. Its purpose is to inform you of the average number of days that your customers take to pay you.
Example:
A) Parts Debtors = R40,208 B) Parts Daily Credit Turnover* = R935 C) Debtor Days = 43 days (A ÷ B)
Note: In order to calculate the Parts Daily Credit Turnover, you will need to take the annualised Parts Turnover sold on credit and divide that figure by 365 to arrive at a daily sales turnover.
A) Annual Turnover On Credit = R341,275 B) Days in 1 year = 365 C) Parts Daily Credit Turnover = R935 (A ÷ B)
Discussion:
In
the example provided above the average amount of debt is outstanding
for a period of 43 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.