Understanding and Managing Creditor Days

What are Creditor Days?

Creditor Days (also known as Days Payable Outstanding or DPO) measures how long, on average, it takes your business to pay its suppliers after receiving an invoice.

Creditor Days = (Trade Creditors ÷ Direct Costs) × Number of Days in Period

For example, if you owe $20,000 to suppliers and your monthly purchases total $40,000, your Creditor Days would be 15 days.

Why are Creditor Days Important?

Creditor Days show how efficiently you’re managing your supplier payments and overall cash flow.

Key reasons Creditor Days matter:

• Cash Flow Flexibility: Longer creditor days mean you hold on to your cash longer, which can support working capital.

• Supplier Relationships: Paying too late may damage supplier trust or affect negotiated terms.

• Financial Health Signal: A sudden increase or decrease in creditor days may indicate financial stress or operational inefficiencies.

• Cost Control: Efficient payment cycles can unlock early payment discounts or improve purchasing leverage.
  

How Creditor Days Helps Your Business

By monitoring and optimising Creditor Days, you can:

• Better manage cash flow and plan future spending.

• Build stronger supplier relationships through timely payments.

• Avoid late fees and leverage payment discounts.

• Identify potential supply chain issues early.
  

How Creditor Days is Calculated in Acanthis

In the General Version of Acanthis:

• Creditor Days is calculated using:

  • Trade creditor balances from your accounting platform

  • Your total purchases or cost of goods sold for the same period

• The calculation is automatic and updated monthly to reflect actual performance.

Important:
Make sure your accounting integration (e.g., Xero or QuickBooks) is connected and regularly synced to ensure accurate data.

Setting Your Creditor Days Target in Acanthis

You can configure your Creditor Days target each month to reflect your ideal cash flow strategy or supplier expectations.

To adjust your target:

1. Go to Settings:
   Open the Settings menu in Acanthis.

2. Select Organisation Configs:
   Click Organisation Configs, then choose Monthly Configs.

3. Choose the Relevant Month:
   Use the calendar selector to choose the month you want to update.

4. Set Your Creditor Days Target:
   Enter the target value that aligns with your goals for payment timing.

5. Click Save to save your changes.
   

6. Click Publish to apply your changes.

Tip:
Many businesses aim for 30–45 Creditor Days, but this varies by industry. If cash flow is tight, extending creditor days slightly (while keeping suppliers informed) can help preserve working capital.