Average Collection Period Calculator
From accounts receivable and net credit sales, work out how many days on average it takes to collect cash from customers.
Input Data
Results
At a glance:Average collection period = accounts receivable / net credit sales x period days (usually 365). It measures how long credit sales stay uncollected. Shorter is generally better; compare with your credit terms. Reciprocal of receivables turnover (net credit sales / receivables).
Formula
Average collection period = accounts receivable / net credit sales x period days (usually 365).
Average collection period = 365 / receivables turnover.
How to Use
- Enter the accounts receivable balance.
- Enter net credit sales for the period.
- Confirm the period days (365 for a year) and view the collection period.
FAQ
What is the difference from A/R Days?
They measure the same idea. A/R Days often uses total revenue as a convenient denominator; the average collection period strictly uses net credit sales. Since only credit sales create receivables, net credit sales is the more accurate base. Keep the basis consistent when comparing.
Is a shorter period always better?
Generally yes — faster cash, healthier cash flow, lower bad-debt risk. But tightening credit too hard may hurt sales and customer relations. Aim to keep the period around or just below your credit terms.
How does it relate to receivables turnover?
They are reciprocals. Receivables turnover = net credit sales / receivables (cycles per year); average collection period = 365 / turnover (days per cycle). Higher turnover means fewer days.
Why net credit sales not total revenue?
Only credit sales generate receivables, so dividing by net credit sales gives the true collection time. Using total revenue (which includes cash sales) overstates the days. Use credit sales if available; otherwise state the approximation.
How does it fit the cash conversion cycle?
It is the 'collection' leg: CCC = DIO (inventory days) + DSO (this period) - DPO (payables days). Shorter collection means revenue turns to cash faster, easing working-capital pressure. Improve it via early-payment discounts, stricter credit checks and active follow-up.
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References
Content review: Calculatorism Finance Team. Results are for reference only; please refer to the relevant authorities for the official figures.