Creditor Days

Creditor days measures the average number of days a business takes to pay its suppliers after receiving goods or services. The calculation uses the trade creditors balance - the total currently owed to suppliers - divided by annual purchases (or cost of sales as a proxy) and multiplied by 365. Also called Days Payable Outstanding (DPO) or payables days, it sits alongside debtor days as one of the two key working capital ratios for any SMB. Together, they reveal whether a business collects from customers faster than it pays suppliers - the foundation of a healthy cash cycle.

How to Calculate Creditor Days

The standard formula is: (Trade Creditors / Annual Purchases) × 365

For example, a business with £40,000 in trade creditors and £280,000 in annual purchases has creditor days of 52 (The Advisory Group, April 2026). Some analyses substitute cost of sales for annual purchases where purchase data is not separated in management accounts - this is acceptable as a consistent internal measure, though the figure may differ from published industry benchmarks that use one method or the other.

Track creditor days monthly rather than annually. The figure changes as supplier invoices accumulate and payments clear, and a monthly view shows whether payment discipline is tightening or loosening over time.

What Your Creditor Days Figure Tells You

Below 30 days indicates fast payment - which builds supplier goodwill but may mean available cash is being deployed sooner than necessary. Between 30 and 60 days is the typical range for most UK SMBs. Above 60 days can signal cash flow pressure - or it may reflect successfully negotiated extended terms with key suppliers. The distinction matters: extended terms you have agreed in writing are a working capital asset; unilateral delays damage supplier trust and risk supply interruptions.

For construction and project-based businesses, managing creditor days requires care. Extending supplier payments without agreement can interrupt materials deliveries on active jobs - a cost that usually outweighs the short-term cash benefit. The more productive approach is negotiating formal extended terms with key suppliers during contract setup rather than defaulting on standard terms during busy periods.

Zigaflow's purchase order system records the value and date of every supplier commitment against a job record, syncing with Xero, QuickBooks, and FreeAgent to give you the accurate trade creditors figure needed to calculate and monitor creditor days each month.