If you’ve ever sat down and gone through your business financials with your accountant, chances are the phrase “Debtor Days” or “Day Sales Outstanding” would have come up – it’s a common metric for gauging the health of a business.
What might not have been clear though is the potential opportunity that sits behind the Debtor Days number in your financial reports.
The answer is…
“On average a one day reduction in debtor days was worth an additional $18,000 in the bank for your average SMB*”
*results from a recent Debtor Daddy study of 500+ SMB’s
If you’re wondering where to find the cash to fund the new office, new van or simply cover your payroll then your overdue invoices (aka debtors) might be the best place to start!
Here’s how it works
Imagine if every day of the year you made $1000. By the end of the year you will have earned $365,000 in sales. So each day is effectively worth $1000 to you. Put another way, each debtor day is worth $1,000 to you.
So if your Debtor Days are sitting at 35 days then that’s the equivalent of $35,000 of your money sitting in other people’s bank accounts.
Reduce your Debtor Days by 15 days and that’s $15,000 back in your bank account.
This might not seem that exciting when the numbers are small. But for many of businesses we work with a single debtor day is worth between $18,000 and $100,000. For much larger businesses a single debtor day could be worth over $1 million dollars!
“In less than two months a Debtor Daddy user in the creative industry reduced their Debtor Days by 29 days, increasing their bank balance by over $200k.”
The point is, regardless of your business size there’s money in your receivables. And it can be obtained by putting the right controls in place to collect what you’re due faster.
Curious to know what a Debtor Day is worth to you? Take Debtor Daddy for a spin. Or if you’re an accountant or business advisor sign up to RADAR and find out how much cash a debtor day is worth for your clients.