Debtor days and creditor days
Lesson 6 of 13 in our free Business Money Advanced guide: a 5-minute money game with the key points below.
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Questions you'll answer
Illustration: Kettle's catering arm is owed £15,000 by customers. Its yearly credit sales are £91,250. What are its debtor days?
Kettle owes suppliers £9,000. Its yearly credit purchases are £109,500. What are its creditor days, and what does that mean next to 60 debtor days?
A £5,000 invoice is paid 60 days late. Statutory interest is 8% + Bank Rate of 3.75% = 11.75% a year. Roughly how much interest can be claimed (before the fixed compensation)?
Quick facts
- Fact: “Businesses can usually claim statutory interest on late payments from other businesses.” — Under the late payment rules for commercial debts: 8% plus the Bank of England base rate, unless the contract sets its own fair terms.
- Myth: “Statutory late payment interest only applies if the contract says so.” — It applies by law to business-to-business debts unless the contract agrees a different, substantial remedy.
- Fact: “On top of interest, a business can claim fixed compensation for each late invoice.” — £40, £70 or £100 depending on the size of the debt (under £1,000, up to £9,999.99, or £10,000 and over).