Creditor days calculate the days a company must pay all its creditors. Debtor days measure the average amount of days it will take for a business to obtain all payments for the products or services it has sold, which can also be termed accounts receivable days. Accurate bookkeeping includes sending and receiving payments within these timeframes and is the best way to obtain all the necessary and relevant information from which all your accounting is calculated. 
Creditor Days
Creditor days are a way for a company to show its creditworthiness to its creditors and suppliers and to know how long they will wait for their payments.
Within reason, a higher number of days is better for the company since almost all companies wish to conserve their capital as much as possible. However, a business that is especially slow in paying all its bills (for example, taking 100 days or more) could have trouble generating and retaining cash. Even if the company is having trouble financing its operations with its supplier’s funds, a business whose creditor days are in excess will eventually have trouble obtaining and retaining its supplies. Creditor days must be balanced, allowing a company to maintain capital and preserve creditor and supplier relationships through timely payments.
Debtor Days
Debtor days are a way of indicating a business’s efficiency in collecting all their money owed. In these cases, it is beneficial for the company if their debtor days are lower. When the number of debtor days is high, it reflects the company’s inefficiency in collecting what is owed. This may also indicate the company’s bad debts or doubtful sales figures. If suppliers are not confident in the company, they are less likely to pay due invoices.
Ways to Reduce Creditor and Debtor Days
Negotiate Terms
Do not hesitate to negotiate and discuss payment terms and conditions with suppliers. You pick your suppliers based on your specific needs and requirements, whether based on price, product quality, or delivery speed. In most cases, the payment terms and conditions are the last things considered when selecting suppliers.
If you have built a good relationship and rapport with your suppliers, negotiating better payment terms should not be a problem. Similarly, this can help build a rapport with your suppliers, showing them you intend and want to pay them promptly for their supplies.
Offer Discounts
Consider offering discounts or concessions for prompt or early invoice prepayment. For example, if you use invoice finance in your business, you will often pay 3% for the first 40 days of the invoice, with 4.5% for 80 days. You could offer this discount to your clients for upfront payment instead of delivery.
Change Payment Conditions
Although most businesses are flexible with their payment conditions early in their lifecycle, this leads to problems with working capital over time. When your client-supplier payment terms begin to change, you might face difficulty operating your business. New businesses often apply new, shorter payment terms to their new clients to adapt to this change. When confident that there is no issue receiving timely payments, they revisit the current payment plan and relax the terms and conditions.
Set Up Automated Reminders
With cloud accounting like Geniac and Xero, several solutions can help a business with automating timely reminders to seek out owed payments and pay outstanding invoices. This automated credit control removes manual reminders and processes and can help protect business cash flow.
Externally Control Credit
Although automated credit reminders can be beneficial, credit control cannot be beaten. If you happen to have a bookkeeper who works part-time, you will likely find out that you have lengthy debtor days since payments will be made and received only during their work hours. External credit control enables you to have confidential and quick results that will allow your business to operate efficiently.
Boost Stock Control
A business must become productive and efficient in its sales and purchasing cycle to reduce the necessity of working capital. One way to accomplish this is to boost the company’s stock control.
About Complete Controller® – America’s Bookkeeping Experts Complete Controller is the Nation’s Leader in virtual bookkeeping, providing service to businesses and households alike. Utilizing Complete Controller’s technology, clients gain access to a cloud platform where their QuickBooks™️ file, critical financial documents, and back-office tools are hosted in an efficient SSO environment. Complete Controller’s team of certified US-based accounting professionals provide bookkeeping, record storage, performance reporting, and controller services including training, cash-flow management, budgeting and forecasting, process and controls advisement, and bill-pay. With flat-rate service plans, Complete Controller is the most cost-effective expert accounting solution for business, family-office, trusts, and households of any size or complexity.