Creditor Days

Creditor days (also called accounts payable days) measure how long a business takes to pay its suppliers on average. The formula is: (Trade payables / Cost of goods sold) x 365. A business with £200,000 in trade payables and £2,000,000 annual cost of goods has creditor days of 36.5.

Creditor days are a key indicator of working capital management. Extending creditor days (paying suppliers later) improves short-term cash flow but can damage supplier relationships and credit terms. Shortening creditor days (paying faster) improves supplier relationships and may attract early payment discounts but uses more cash.

Lenders analyse creditor days alongside debtor days to understand a business's working capital cycle. A business with very high creditor days may be under cash flow pressure, using supplier credit as an implicit funding mechanism. Very low creditor days may indicate the business pays promptly and has strong cash flow, or that suppliers require fast payment due to the business's credit profile.

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