Metric Explainer: Receivable Days (Debtor Days)
On average, how many days it takes for the company to collect payment from customers after a sale is made. "Receivable Days batata hai ki bikri ke baad paisa...
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Simple definition
On average, how many days it takes for the company to collect payment from customers after a sale is made.
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"Receivable Days batata hai ki bikri ke baad paisa aane mein kitne din lagte hain. 60 days matlab 2 mahine baad customer paisa deta hai."
Why it matters
- Cash conversion speed — lower receivable days = faster cash collection
- Working capital efficiency — high receivable days tie up cash in unpaid bills
- Customer quality indicator — rising receivable days may signal weak customer base
- Part of Cash Conversion Cycle — Receivable Days + Inventory Days − Payable Days
Formula
Receivable Days = (Trade Receivables / Revenue) × 365
Good range — by sector
| Sector | Good | Average | Concerning |
|---|---|---|---|
| FMCG | < 15 days | 15–30 days | > 45 days |
| IT Services | < 65 days | 65–85 days | > 90 days |
| Pharma | < 60 days | 60–90 days | > 100 days |
| Infra/Construction | < 120 days | 120–180 days | > 200 days |
| Auto (OEM) | < 25 days | 25–45 days | > 60 days |
Trend analysis matters more than level
| Trend | Signal |
|---|---|
| Receivable days improving (falling) | Better collection efficiency or tighter credit terms |
| Receivable days stable | Normal |
| Rising 5–10 days per year | Possible channel stuffing or weaker customer mix |
| Sudden spike (20+ days) | Investigate immediately — a large customer may be defaulting |
Common mistakes
Mistakes to avoid
- Comparing across sectors — IT companies at 75 days is normal; FMCG at 75 days is alarming
- Quarter-end vs year-end — Receivables at quarter-end can be inflated by big Q4 sales pushes
- Channel stuffing — Companies may push goods to distributors at year-end, inflating revenue and receivables
- Government vs private clients — Government clients pay very slowly (120–360 days). If client mix changes, receivable days shift
Real example: Channel stuffing detection
| Metric | FY22 | FY23 | FY24 | Signal |
|---|---|---|---|---|
| Revenue growth | 12% | 18% | 25% | Accelerating |
| Receivable Days | 50 | 62 | 85 | Spiking! |
| CFO/PAT | 1.1 | 0.9 | 0.6 | Declining |
Revenue growing fast but receivable days and cash conversion deteriorating — classic channel stuffing pattern. The company is booking sales but not collecting cash.
Red flags
- Receivable days growing 10%+ annually — collection issues
- Receivable days rising while peers' are stable — company-specific problem
- Revenue growing but receivables growing faster — possible channel stuffing
- Large "unbilled revenue" component in receivables — may mask actual collection issues (common in IT)
Related metrics
- Inventory Days — How long goods sit unsold
- Payable Days — How long the company takes to pay suppliers
- Cash Conversion Cycle — The combined working capital efficiency metric
- Working Capital — Receivables are a major component