Average Collection Period Converter

Receivables Collection Period Calculator

Input Fields

Accounts receivable

AR

$

The amount of money owed by customers

Net credit sales

CS

$

Total sales made on credit minus returns and allowances

Number of days

D

Typically 365 for annual, or 90 for quarterly analysis

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Average Collection Period

Interpretation

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Average Collection Period Formula

$$\text{Average Collection Period} = \frac{\text{Accounts Receivable}}{\text{Net Credit Sales}} \times \text{Number of Days}$$

Explanation:
This formula estimates the average number of days it takes a company to receive payment from its customers. A lower value indicates faster collection and stronger cash flow.

The average collection period is a key liquidity metric for businesses relying on credit sales. It shows how efficiently a company manages its accounts receivable. A short period suggests effective credit and collection policies, while a long period may signal cash flow issues or poor credit management.

Example Variables:

• Accounts Receivable: $25,000
• Net Credit Sales: $150,000
• Period: 365 days
• Result: (25,000 / 150,000) × 365 = 60.83 days

Use cases:

• Track payment cycles
• Identify slow-paying customers
• Benchmark industry standards