Creditor days estimate how long a business takes to pay its suppliers: trade creditors divided by credit purchases (or cost of sales), multiplied by 365. A rising figure can mean better use of supplier credit or a business that is short of cash, and large companies now have to publish the invoice level version of the same measure.

How do you calculate creditor days?

ACCA gives the payables payment period as payables ÷ credit purchases × 365 days. Because outsiders rarely know credit purchases, ACCA notes that cost of sales is often used as an approximation. Its interpretation guidance specifies payables for goods and services received, which in UK accounts is the “Trade creditors” line within creditors falling due within one year.

Getting a figure that means something depends on matching the top and bottom of the fraction:

  • VAT. Supplier balances include VAT where the supplier charged it, but purchases and cost of sales in the accounts are net of recoverable VAT. Strip the VAT out of creditors or gross up purchases, using the same approach described for debtor days.
  • Overhead suppliers. Trade creditors usually include rent, utilities, professional fees and other overheads, but cost of sales does not. A service business with little cost of sales can show absurd creditor days for that reason. Where you have the ledger, use total credit purchases of goods and services.
  • Accruals. Goods received but not yet invoiced are normally accrued rather than posted to the purchase ledger. Decide whether to include them and do it consistently; see goods received not invoiced.
  • Average or closing balance. ACCA notes exam questions assume year end payables are representative of the average. A business that pays a large supplier run on the last day of the year will show a misleadingly low figure.

What does a worked example look like?

Illustration only. A manufacturer’s credit purchases of materials and overheads for the year were £960,000 before VAT, all standard rated. The purchase ledger at the year end totals £204,000 including VAT.

  • Trade creditors excluding VAT: 204,000 ÷ 1.2 = £170,000.
  • Creditor days: 170,000 ÷ 960,000 × 365 = about 65 days.
  • Had cost of sales of £720,000 been used instead, with VAT left in, the answer would have been 204,000 ÷ 720,000 × 365 = about 103 days.

If the company’s standard terms with its suppliers are 30 days end of month, 65 days tells you it is paying, on average, well beyond terms. The 103 day figure would have exaggerated that by more than a month.

What do creditor days reveal about supplier payment practice?

ACCA’s interpretation guidance says an increase in payables days could indicate cash flow difficulties, with the business delaying payments and using suppliers as a free source of finance, and stresses that a business should pay within the agreed credit period to avoid conflict with suppliers. A fall can mean suppliers are being paid faster, credit terms have been tightened or the business is taking early settlement discounts.

ACCA’s working capital guidance adds two practical limits. A business would generally prefer longer payables days unless that costs it settlement discounts or damages its reputation, since a good corporate citizen is expected to pay promptly. And powerful suppliers can respond to slow payment by demanding cash on delivery, which takes payables days to zero. ACCA’s receivables article makes the mirror point: the cost to a customer of refusing a settlement discount equals the cost to the supplier of offering it, so a generous discount can be worth taking even if it means borrowing on overdraft.

Read creditor days alongside debtor days. If customers take 45 days and suppliers are paid in 75, suppliers are financing the business’s customers. That can be a deliberate and sustainable model, as with large retailers, or a sign of strain. The cash conversion cycle brings the two together with stock days.

What do large companies have to report about paying suppliers?

The Reporting on Payment Practices and Performance Regulations 2017 (SI 2017/395) require large companies and LLPs to publish payment data on a government service at least twice a year. GOV.UK describes a large business as one with at least two of £54 million turnover, £27 million on its balance sheet and 250 employees. The report must be published within 30 days of the end of each reporting period, and failing to do so is a criminal offence by the business and every director.

The published statistics are not the balance sheet ratio. They include:

  • the average (mean) number of days taken to pay invoices paid in the period, counted from the day after the invoice is received
  • the percentage of payments made within 30 days, between 31 and 60 days, and on or after day 61, by number of invoices
  • for financial years beginning on or after 1 January 2025, the sum of payments in each of those bands
  • the percentage of payments due in the period that were not paid within agreed terms

The Companies (Directors’ Report) (Payment Reporting) Regulations 2025 (SI 2025/1152) add a new Part 9 to Schedule 7 to the large and medium sized company regulations. For financial years beginning on or after 1 January 2026, a large company’s directors’ report must state its standard payment period in days, any variation to its standard terms and how suppliers were notified or consulted, and the average days, percentage bands and sums described above. Auditors already have to report whether the directors’ report is consistent with the accounts.

The two measures differ for good reasons. The published average counts each invoice equally, ignores invoices not yet paid and starts the clock when the invoice arrives. Creditor days from the accounts are weighted by value and measure what is still unpaid at one date. A company can therefore report a short average time to pay while its balance sheet creditor days are long, for example if a few large invoices are paid late.

How long is a business allowed to take?

Under the late payment rules summarised on GOV.UK, an agreed payment date for business to business transactions should usually be within 60 days, although a longer period can be agreed if it is fair to both businesses. Where no date is agreed, payment becomes late 30 days after the customer receives the invoice or the goods or service, whichever is later. The supplier can then charge statutory interest of 8% plus the Bank of England base rate unless the contract sets a different rate.

Public sector work adds another layer. GOV.UK’s prompt payment policy says suppliers bidding for central government contracts above £5 million a year must show they pay 95% of invoices within 60 days, and from 1 October 2025 must pay within an average of 45 days or fewer. Public sector buyers must include 30 day payment terms and pass them down the supply chain.

How does supply chain finance affect the figures?

Some large buyers offer suppliers early payment through a finance provider. Government guidance on the reporting duty says that if the supplier receives the full amount without paying a fee, the payment date is when the finance provider pays the supplier. If the supplier bears a fee or a deduction, the payment date is when the buyer pays the finance provider. So a buyer cannot shorten its reported payment times by offering early payment that suppliers pay for themselves. In the balance sheet ratio, how the arrangement is presented decides whether the amounts still count as trade creditors.

What mistakes come up most often?

  • Dividing a VAT inclusive purchase ledger by VAT exclusive cost of sales.
  • Using cost of sales where most supplier invoices relate to overheads.
  • Including PAYE, VAT, corporation tax or director’s loan balances in the numerator.
  • Comparing creditor days with a published payment practice report as if they measured the same thing.
  • Treating a long figure as good management when suppliers are in fact chasing. Reconciling supplier statements each month shows quickly whether balances are overdue or disputed.

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Sources

Reviewed by Christine Anderson, Broker, Solar Protect. Last reviewed 8 October 2026. Part of Accountapedia, the Solar Protect guide to UK tax and accounting. This page is general information, not personalised advice.