DBT explained: why the Days Beyond Terms are crucial to your financial resilience

DBT measures how many days, on average, a company needs beyond the agreed payment term to settle its invoices. An increase from, say, 18 to 32 days may seem small, but it can indicate increasing pressure on cash flow. This is especially true if it then rises further to, say, 53 days. The longer money is tied up with debtors, the less room there is to finance suppliers, staff or investments on time.

In short: a rising DBT is an early sign of pressure on your working capital.

Whereas Days Sales Outstanding (DSO) indicates how long it takes on average to receive payments after the sale was closed, Days Beyond Terms (DBT) focuses only on invoices whose payment term has already been exceeded. DSO therefore tells us something about the efficiency of credit management, while DBT tells us something about the risk.

In short: DBT is the thermometer that indicates whether your customers or suppliers are systematically late in paying.

The impact of a rising DBT varies from sector to sector, but the signals are similar everywhere:

Construction sector

Cash flow in the construction industry is traditionally tight. Projects take a long time, and payments often only follow after completion. Rising DBT among subcontractors or customers can cause a domino effect that delays entire projects and increases financing costs.

Transport and logistics

Transport companies operate on thin margins and high fuel costs. When customers consistently pay later, transporters have to pre-finance their operating costs (such as wages, tolls and diesel) for longer. A rising DBT is a direct indicator of liquidity pressure in this sector.

Wholesale and distribution

This sector makes extensive use of credit lines and inventory financing. A higher DBT often indicates a shifting risk in the chain. When customers pay later, the financing burden accumulates at the distributor.

Business services

Service providers with monthly invoicing (such as consultancy or marketing) are quickly affected by a rising DBT. They must continue paying their staff, while customers only settle their invoices weeks or months later.

In short: in every sector, DBT is a reliable and early indicator of when financial breathing space is disappearing.

Despite its value, DBT receives little attention in reports. There are three main reasons for this:

• Lack of context: a DBT of 14 days seems acceptable, but without trend analysis, you don't know whether the figure is rising or falling.
• Unfamiliarity: ratios such as solvency or current ratio are more obvious than payment behaviour.
• Lack of up-to-date data: many companies work with quarterly or annual reports, which means that problems only become apparent once the damage has already been done.

In short: DBT is easy to measure but is often overlooked because it is not included in reports as standard.

DBT reacts faster than traditional financial indicators. When companies pay their suppliers later, this is often one of the first signs of cash flow pressure, even before it becomes visible in profit or loss figures.

A rising DBT does not necessarily mean that a company is in trouble, but that its behaviour is changing. This could indicate:

• temporary cash flow problems
• inefficient invoice processing
• strategic choices to preserve working capital
• deteriorating customer relationships

In short: DBT reveals invisible trends, allowing you to respond more quickly to reassess financial risk or adjust payment terms.

Companies that monitor their DBT on a structural basis evolve from reactive to proactive risk management. Instead of only reacting when payments are late, they recognise trends at an early stage and can take preventive action.

Some questions you should ask yourself regularly:

• How has the DBT of my customers or suppliers developed over the last 12 months?
• Are there any notable peaks in specific regions or sectors?
• Has the DBT of key customers risen sharply recently?
• How does our own DBT compare to the sector average?

In short: those who actively monitor DBT gain a head start in risk management and credit policy.

In an economic climate where margins are under pressure and financing is becoming more expensive, every early warning sign is valuable. DBT is one such sign: easy to measure, but rich in meaning.

Regardless of the sector in which you operate, a rising DBT tells you that something is going wrong in your chain. By actively monitoring this figure, you can act more quickly, limit payment risks and strengthen your financial resilience.

In short, DBT offers predictive insight into the financial health of your customers and suppliers. Thanks to data analysis and AI, it is becoming an increasingly important metric for future-oriented risk management. Those who understand DBT can see problems coming before they manifest themselves.