In accounting, the average due date refers to the average length of time that a company takes to pay its bills or the average length of time that it takes customers to pay their bills to the company. This can be calculated by taking the total amount of time that it takes for all payments to be made, either by the company or to the company, and dividing that number by the number of payments. This metric can provide insight into a company’s liquidity and ability to manage its cash flow.
For example, if a company pays its bills in an average of 30 days and its customers pay their bills in an average of 60 days, the company’s average due date would be 45 days. This means that on average, the company has 45 days to use the funds before they are due to be paid out. However, it is important to note that many other factors such as company size, industry, agreement with suppliers, laws of the country and many other influences the due date and it should not be considered as the single metric for liquidity and cash flow.
