Average Collection Period Calculator

Calculate average collection period in days from accounts receivable and net credit sales. See receivables turnover and plain-English interpretation.

Use the Average Collection Period Calculator

Enter average AR and net credit sales for the period. Results update as you type.

Accounts receivable & sales

Average AR and net credit sales for the period.

Average accounts receivable ($)

Net credit sales for period ($)

Period length (days)

Results

Average collection period

40 days

Receivables turnover

9.13

A longer collection period means slower cash collection from customers. Use this to compare with payment terms and industry norms.

What this metric means

Average collection period tells you how long it takes to get paid on credit sales. A longer period means slower cash collection and more capital tied up in receivables.

How to improve the metric

Tighten payment terms where possible, send invoices promptly, follow up on overdue accounts, and consider incentives for early payment or penalties for late payment within the law.

FAQs

What is average collection period?▾

It’s the average number of days it takes to collect payment on credit sales. Formula: (Average AR ÷ Net credit sales) × Days in period. Lower is generally better for cash flow.

How do I get average accounts receivable?▾

Use (AR at start of period + AR at end of period) ÷ 2, or your accounting system’s average. Enter that value in the calculator as average AR.

Why use net credit sales?▾

Only credit sales generate receivables. Cash sales don’t create AR, so including them would understate the ratio and make collection look slower than it is.

What’s a good collection period?▾

It should align with your payment terms (e.g. net 30). If collection period is much higher than terms, customers are paying late. Compare with industry norms and your own history.

What’s receivables turnover?▾

Net credit sales ÷ average AR. It’s how many times you “turn over” receivables in the period. Higher is better. Collection period (days) = Days in period ÷ Receivables turnover.

Related tools

Browse all calculators on NetGrow.

Use the Average Collection Period Calculator

Enter average AR and net credit sales for the period. Results update as you type.

Accounts receivable & sales

Average AR and net credit sales for the period.

Average accounts receivable ($)

Net credit sales for period ($)

Period length (days)

Results

Average collection period

40 days

Receivables turnover

9.13

A longer collection period means slower cash collection from customers. Use this to compare with payment terms and industry norms.

FAQs

What is average collection period?▾

It’s the average number of days it takes to collect payment on credit sales. Formula: (Average AR ÷ Net credit sales) × Days in period. Lower is generally better for cash flow.

How do I get average accounts receivable?▾

Use (AR at start of period + AR at end of period) ÷ 2, or your accounting system’s average. Enter that value in the calculator as average AR.

Why use net credit sales?▾

Only credit sales generate receivables. Cash sales don’t create AR, so including them would understate the ratio and make collection look slower than it is.

What’s a good collection period?▾

It should align with your payment terms (e.g. net 30). If collection period is much higher than terms, customers are paying late. Compare with industry norms and your own history.

What’s receivables turnover?▾

Net credit sales ÷ average AR. It’s how many times you “turn over” receivables in the period. Higher is better. Collection period (days) = Days in period ÷ Receivables turnover.