Debtor days

This is calculated by dividing your trade debtors by annual sales and multiplying by 365. This shows the number of days' credit being afforded to your customers and should be compared both with your normal trade terms and the previous month's figures. Normal procedures should involve the preparation of a monthly-aged list of debtors showing the name of the customer, the value and to which month it relates.

The oldest and largest debtors can be seen at a glance for immediate consideration of what further recovery action is needed. The list may also show over-reliance on one or two large customers or the need to stop supplying a particularly bad payer until his arrears have been reduced to an acceptable level. Consideration should be given to making up bills to a date before the end of the month and making sure the accounts are sent out immediately, followed by a statement four weeks later.

Consider giving discounts for prompt payment. If all else fails, and legal action for recovery is being contemplated, call at the County Court and ask for their leaflets.

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