Debtor Collection Period, also known as Average Collection Period, is the average time it takes for a business to collect the money owed to it by its trade debtors. This period is critical for managing cash flow effectively.
Trade debtors, also known as trade receivables, represent amounts owed to a business by its customers for goods or services delivered or used but not yet paid for. It is a key component in the working capital of a business.
Trade receivables, also known as accounts receivable or trade debtors, represent amounts owed to a business by its customers for invoiced amounts. These are classified as current assets on the balance sheet but are separate from prepayments and other non-trade debtors. A provision for bad debts is often shown against the trade receivables balance as per the prudence concept. This provision is based on the company's historical data of bad debts and its current expectations.
