Query is: How GP calculates Average Days To Pay for a customer?
According to GP’s Receivables Management user manual:
After a customer has paid his or her first invoice, the average days to pay (ADTP) is calculated based on the number of invoices a customer has, the time taken to pay the first invoice, and the time taken to pay the most recent invoice.
The formula for calculating the average days to pay is:
ADTP = (Current ADTP) x (Number of Invoices) + (Number of Days Taken to Pay Most Recent Invoice) / (Number of Invoices + 1)
The time it took to pay the first invoice would provide the initial value for the Current ADTP. Any later invoices paid by this customer will provide the values for the number of invoices and the number of days taken to pay the most recent invoice. The ADTP calculated on the customer’s initial invoices then becomes the “Current ADTP.” You can use this value when you recalculate the ADTP for later invoices.
There are two ADTPs; LTD (Life To Date) and YTD (Year To Date).
The important point that you may have to remember is that Average Days To Pay YTD will be calculated only based on Amounts Since Last Close.