I tried creating a backup for my Zorin OS distribution and it took over 4 hours without completing, so I had to cancel it.
Is this normal?
Are there any incorrect settings?
The system disk is currently using 37 GB of storage.
The external storage device is a 123 GB USB flash drive formatted with the ext4 file system.
What is the issue, if there is one?
It can take a while, yeah. The good news is that it's only for the initial snapshot, as subsequent ones will be taken incrementally i.e., only record what changed since the last snapshot taken.
But it's strange that it's taken that long for only 37GB. One thing that you can try (although not while Timeshift running) is using a different USB port, and make sure it supports USB 3.0, which is much faster than USB 2.0. There's usually a small thunder icon on the connector or the connector is painted in blue to distinguish it easier.
If you also have other things plugged in and/or are using the computer while taking the snapshot, that will make it take longer.
The characteristics of the flash drive itself are also important; most of them are not designed with high performance in mind.