How To Calculate Debtor Days On Hand

Debtor Days on Hand Calculator




Introduction & Importance

Debtor days on hand is a crucial metric in cash flow management, measuring the average time taken by a business to collect its receivables. It’s calculated as (Accounts Receivable / Credit Sales) * Average Collection Period. Understanding and optimizing this metric can significantly improve your cash flow.

How to Use This Calculator

  1. Enter the total accounts receivable, credit sales, and average collection period in days.
  2. Click ‘Calculate’.
  3. View the results and chart below.

Formula & Methodology

The formula for debtor days on hand is:

(Accounts Receivable / Credit Sales) * Average Collection Period

Here’s how the calculator works:

  • It takes the accounts receivable, credit sales, and average collection period as inputs.
  • It calculates the debtor days on hand using the formula above.
  • It outputs the result and generates a simple line chart showing the change in debtor days on hand over time.
Debtor days on hand calculation example

Real-World Examples

Case Study 1

A company with $500,000 in accounts receivable, $2,000,000 in credit sales, and an average collection period of 45 days has a debtor days on hand of 11.25 days.

Case Study 2

A larger company with $2,500,000 in accounts receivable, $10,000,000 in credit sales, and an average collection period of 60 days has a debtor days on hand of 15 days.

Case Study 3

A smaller company with $100,000 in accounts receivable, $500,000 in credit sales, and an average collection period of 30 days has a debtor days on hand of 6 days.

Debtor days on hand comparison

Data & Statistics

Company Accounts Receivable ($) Credit Sales ($) Average Collection Period (days) Debtor Days on Hand (days)
Company A 500,000 2,000,000 45 11.25
Company B 2,500,000 10,000,000 60 15
Company C 100,000 500,000 30 6
Industry Average Debtor Days on Hand (days)
Manufacturing 45
Retail 30
Wholesale 40

Expert Tips

  • Regularly review and update your debtor days on hand to ensure accurate cash flow projections.
  • Monitor your customers’ payment patterns and adjust your credit policies as needed.
  • Consider offering discounts for early payment to encourage faster collections.

Interactive FAQ

What is a good debtor days on hand?

A good debtor days on hand varies by industry, but generally, lower numbers indicate better cash flow management.

How can I reduce my debtor days on hand?

Improve your collections process, offer discounts for early payment, and monitor your customers’ payment patterns.

What is the average debtor days on hand in my industry?

See the table above for industry averages. However, averages can vary significantly by company.

Source: U.S. Census Bureau

Source: U.S. Bureau of Labor Statistics

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