We are independent & ad-supported. We may earn a commission for purchases made through our links.
Advertiser Disclosure
Our website is an independent, advertising-supported platform. We provide our content free of charge to our readers, and to keep it that way, we rely on revenue generated through advertisements and affiliate partnerships. This means that when you click on certain links on our site and make a purchase, we may earn a commission. Learn more.
How We Make Money
We sustain our operations through affiliate commissions and advertising. If you click on an affiliate link and make a purchase, we may receive a commission from the merchant at no additional cost to you. We also display advertisements on our website, which help generate revenue to support our work and keep our content free for readers. Our editorial team operates independently of our advertising and affiliate partnerships to ensure that our content remains unbiased and focused on providing you with the best information and recommendations based on thorough research and honest evaluations. To remain transparent, we’ve provided a list of our current affiliate partners here.

What Is Debtor Turnover?

Malcolm Tatum
Updated Feb 04, 2024
Our promise to you
WiseGeek is dedicated to creating trustworthy, high-quality content that always prioritizes transparency, integrity, and inclusivity above all else. Our ensure that our content creation and review process includes rigorous fact-checking, evidence-based, and continual updates to ensure accuracy and reliability.

Our Promise to you

Founded in 2002, our company has been a trusted resource for readers seeking informative and engaging content. Our dedication to quality remains unwavering—and will never change. We follow a strict editorial policy, ensuring that our content is authored by highly qualified professionals and edited by subject matter experts. This guarantees that everything we publish is objective, accurate, and trustworthy.

Over the years, we've refined our approach to cover a wide range of topics, providing readers with reliable and practical advice to enhance their knowledge and skills. That's why millions of readers turn to us each year. Join us in celebrating the joy of learning, guided by standards you can trust.

Editorial Standards

At WiseGeek, we are committed to creating content that you can trust. Our editorial process is designed to ensure that every piece of content we publish is accurate, reliable, and informative.

Our team of experienced writers and editors follows a strict set of guidelines to ensure the highest quality content. We conduct thorough research, fact-check all information, and rely on credible sources to back up our claims. Our content is reviewed by subject-matter experts to ensure accuracy and clarity.

We believe in transparency and maintain editorial independence from our advertisers. Our team does not receive direct compensation from advertisers, allowing us to create unbiased content that prioritizes your interests.

Sometimes referred to as accounts receivable turnover, "debtor turnover" is a term used to describe how quickly customers pay for goods and services purchased once those orders have been invoiced. Companies can use this information to determine if individual customers are routinely paying within terms or if the average amount of days it takes to receive a payment exceeds that amount. The same type of calculation can be applied to the entire customer base, providing valuable information about the rate of cash flow into the company from its generated sales. Typically, a debtor turnover that is at or near the payment terms extended on the invoices is considered healthy, while a turnover that exceeds those terms may be considered grounds for making some changes in how purchases by certain customers are handled.

There is some variation in how this ratio is calculated, based on what a company considers equitable payment terms. One simple example of how to calculate the debtor turnover ratio associated with an individual customer is to consider a client a standing monthly order for office supplies. The terms for the monthly ordwith ers are 30 days from receipt of invoice. Over the course of the year, that client will turn over or tender payment on a total of 12 invoices. By identifying the number of days after invoicing that it took to receive payment for each of those invoices, adding the totals together, then dividing by 12, it is possible to determine the debtor turnover for that annual period. Assuming that the turnover ratio is under 30 days, this would indicate a healthy cash flow situation for the company.

Calculating debtor turnover is a beneficial activity for businesses of all sizes. Doing so provides insight into how well the invoicing process is working in terms of getting accurate invoices out in a timely manner as well as how well the posting of receipts to the receivables is taking place. The calculation also aids in making sure the company’s payment terms are well understood by their clients, and that those terms are workable within the corporate culture that is applicable to the industry types that the company services.

Companies will normally engage in evaluating overall debtor turnover for shorter periods of time, often at least once per quarter. This approach works hand in hand with analyzing the aging of invoices, since it helps to identify trends such as a gradual increase in the average debtor turnover. For example, should the analysis indicate that the average debtor turnover has progressed from 28 days to 36 days over the span of three quarters, this indicates a need to identify the reasons for the increase. The reasons could be internal issues with lag time between preparation and actual mailing of the invoices, or possibly some customers who are taking longer to pay than in the past. Identifying the underlying reasons for the change in turnover make it easier to take appropriate action to protect the cash flow.

WiseGeek is dedicated to providing accurate and trustworthy information. We carefully select reputable sources and employ a rigorous fact-checking process to maintain the highest standards. To learn more about our commitment to accuracy, read our editorial process.
Malcolm Tatum
By Malcolm Tatum
Malcolm Tatum, a former teleconferencing industry professional, followed his passion for trivia, research, and writing to become a full-time freelance writer. He has contributed articles to a variety of print and online publications, including WiseGeek, and his work has also been featured in poetry collections, devotional anthologies, and newspapers. When not writing, Malcolm enjoys collecting vinyl records, following minor league baseball, and cycling.
Discussion Comments
Malcolm Tatum
Malcolm Tatum
Malcolm Tatum, a former teleconferencing industry professional, followed his passion for trivia, research, and writing...
Learn more
WiseGeek, in your inbox

Our latest articles, guides, and more, delivered daily.

WiseGeek, in your inbox

Our latest articles, guides, and more, delivered daily.