- Trade debtors are unpaid customer invoices, held as a current asset.
- Debtor days = (trade debtors / annual credit sales) x 365.
- A rising debtor days figure is an early warning on cash flow.
Trade debtors are customers who owe your business money for goods or services you have already supplied. They appear on the balance sheet as a current asset, because the money is expected within twelve months, and the figure is the total of your unpaid sales invoices at that date. Trade debtors are separate from other debtors, which covers amounts owed to the business for anything other than ordinary sales, such as a tax refund due or a deposit held by a supplier.
Most people land here asking what is a trade debtor and what the number is telling them about their cash. If you’d rather have someone keep the ledger straight for you, Sleek’s day-to-day bookkeeping does exactly that. The rest of this guide walks through what are trade debtors in practice, how to calculate the figure, and what to do when it starts creeping up.
Key takeaways
- Trade debtors are unpaid customer invoices, held as a current asset.
- Debtor days = (trade debtors / annual credit sales) x 365.
- A rising debtor days figure is an early warning on cash flow.
What’s the difference between trade debtors and other debtors?
What is a trade debtor? It’s a customer who owes you money for something you sell as part of your normal business. If you invoice a client for work done and they haven’t paid yet, that unpaid invoice is a trade debtor.
Other debtors are everything else the business is owed that didn’t come from ordinary sales. A VAT refund due from HMRC, an insurance claim, or a rent deposit sitting with a landlord all count as other debtors rather than trade ones.
The distinction matters because the two sit on different lines in your accounts, and lenders read them differently. Trade debtors tell someone how much of your revenue is still stuck with customers, which is a cleaner signal of how well you collect than a mixed figure would be.
Where do trade debtors sit on a balance sheet?
Trade debtors on a balance sheet sit under current assets, usually just below cash and stock. They’re classed as current because you expect the money within a year, and often much sooner than that.
They count as an asset for a simple reason: the work is done and the money is legally owed to you, so it has value even before it lands in the bank. When you first set up your accounts, this figure forms part of your opening balances alongside anything else the business already owned or was owed.
You may also see trade debtors on a balance sheet described as trade receivables. It’s the same thing under a different name, more common in accounts prepared to international standards.
How do you calculate trade debtors?
The trade debtors formula is straightforward: add up every sales invoice you’ve issued that hasn’t been paid at the date you’re measuring. That total is your trade debtors figure, and it’s what shows on the balance sheet.
Knowing how to calculate trade debtors matters more once you want to understand how quickly customers actually pay. For that you convert the figure into debtor days, which is the average number of days it takes to collect an invoice.
Here’s how to calculate trade debtors as a debtor days figure:
Debtor days = (trade debtors / annual credit sales) x 365
Say your annual credit sales are £240,000 and your trade debtors at the year end are £30,000. Divide £30,000 by £240,000, which gives 0.125, then multiply by 365. That works out at roughly 46 days, so on average a customer takes 46 days to settle an invoice.
Run the same trade debtors formula each quarter and you get a trend rather than a snapshot. A single figure tells you little; the direction of travel tells you plenty.
What do debtor days tell you?
Debtor days tell you how long your money sits with customers before it reaches your account. The lower the number, the faster you’re being paid, and the healthier your cash position tends to be.
| Debtor days | What it usually means for a small UK business |
|---|---|
| Under 30 | Customers pay quickly and cash keeps moving. |
| 30 to 60 | Typical for a business invoicing on standard 30-day terms. |
| Over 60 | Cash is tied up and it’s worth asking why. |
What counts as good depends on your terms. If you invoice on 30-day terms and your debtor days sit near 45, customers are routinely paying a fortnight late, which is common but still worth addressing.
A rising figure is the one to watch. If debtor days climb quarter on quarter, more of your revenue is being held up in unpaid invoices, and that can squeeze cash even while sales look fine on paper.
What should you do when trade debtors are too high?
When trade debtors climb too high, the fix is rarely one big action. It’s a handful of small habits that keep invoices moving and stop them ageing quietly in the background.
Set clear payment terms
Agree your terms before you start work, and put them in writing on every invoice. Stating “payment due within 14 days” plainly, and getting the detail right on the invoice itself, removes the ambiguity that lets people delay. Our guide on how to create an invoice covers what to include.
Invoice promptly
The clock only starts when the invoice goes out, so send it the day the work finishes rather than at month end. If you don’t have a system yet, a free invoice generator gets a clean, dated invoice out quickly.
Chase early and consistently
A short, friendly reminder a few days before the due date works better than a chase after it. Accounting software makes this easier, and our tracking debtors in Xero guide shows how to see what’s outstanding at a glance.
Kept-current books are what make all three of these possible, because you can only chase what you can see. This is where outsourced bookkeeping earns its place: the ledger stays reconciled week to week, so nothing slips through unnoticed.
When should you write off a bad debt?
You write off a bad debt when a customer genuinely can’t or won’t pay and further chasing is pointless. In the accounts, you remove the amount from trade debtors and record it as a bad debt expense, which reduces your profit for the period.
Do this once, not repeatedly, and keep a note of why. If you’ve already paid VAT on that sale, you may be able to recover it through bad debt relief, which sits alongside the rules on reclaiming VAT.
Writing something off isn’t an admission of failure. It’s an honest reflection of what you’ll actually collect, and it keeps your trade debtors figure meaningful rather than flattering.
How Sleek helps with trade debtors
Understanding what are trade debtors is the easy part. Keeping the figure accurate is the ongoing work, because a trade debtors number is only as good as the bookkeeping behind it.
When your ledger is reconciled every week, the number on your balance sheet is real and your debtor days actually mean something. You can also spot a late payer well before it turns into a cash problem.
Sleek’s in-house accountants keep your sales ledger current and chased, backed by software that shows exactly what’s outstanding at any point in the year. No year-end scramble to reconstruct who owes what.
Want your sales ledger kept current and chased?
FAQs on trade debtors
What is the difference between trade debtors and trade creditors?
Trade debtors are customers who owe you money for sales you’ve made, so they’re an asset. Trade creditors are suppliers you owe money to for purchases you’ve made, so they’re a liability. One is money coming in, the other is money going out, and both appear on the balance sheet on opposite sides.
Is VAT included in the trade debtors figure?
Yes, trade debtors are shown gross, meaning the figure includes the VAT you charged on those invoices. This is because the customer owes you the full invoice amount, VAT included, until they pay. The VAT element is then accounted for separately when you complete your VAT return.
Do trade debtors count as income before the customer pays?
Under accruals accounting, which most UK limited companies use, you record the sale as income when you raise the invoice, not when the customer pays. That unpaid invoice becomes a trade debtor in the meantime. The exception is the cash basis, used by some sole traders and smaller businesses, where income is only recorded once the money arrives.
Where do I find trade debtors in Xero?
In most accounting software the trade debtors total appears as Accounts Receivable, and the detail sits in the Aged Receivables report, which lists who owes you and how overdue each invoice is. The label varies between platforms, but the report you want is always the one showing outstanding customer invoices by age.
Can I charge interest on a late invoice?
Yes. Under the Late Payment of Commercial Debts (Interest) Act 1998, a business can charge statutory interest on a commercial invoice paid late, currently 8% plus the Bank of England base rate, which puts the 2026 rate at 11.75%. You can also claim a fixed sum for recovery costs of £40, £70 or £100 depending on the size of the debt. You’re entitled to charge it even if it wasn’t written into your terms, though many businesses reserve it for repeat offenders.
For more on the wider topic, see our VAT, bookkeeping and accounting questions hub.
