The Days-to-Pay value offers a quick assessment of the company’s overall credit risk by providing us with the average time it takes a company to pay its bills. Average Days-to-Pay = the total number of Days-to-Pay divided by the number of closed invoices.
- Invoice 1 was paid 5 days after the invoice date.
- Invoice 2 was paid 10 days after the invoice date.
- Invoice 3 was paid 15 days after the invoice date.
- The total days until paid is equal to 30. Divide this figure by the number of closed invoices 30/3 equals 10 as the average Days-to-Pay.