Average Collection Period Calculator

Input

Note: Average Collection Period calculator uses JavaScript, therefore you must have it enabled to use this calculator.

Results

Average Collection Period calculator measures the average number of days it takes the company to convert outstanding receivables into cash.

Average Collection Period is frequently used together with Receivables Turnover Ratio. Average Collection Period formula is:

 Average Collection Period formula

Average Collection Period calculator is part of the Online financial ratios calculators, complements of our consulting team.

Terms of use

  1. Complementarily, in order to calculate the Average Collection Period for your business, we offer a calculator free of charge.

  2. You may link to this calculator from your website as long as you give proper credit to C. C. D. Consultants Inc. and there exists a visible link to our website.
    To link to our Average Collection Period Calculator from your website or blog, just copy the following html code:

    <a href="http://www.ccdconsultants.com/calculators/financial-ratios/average-collection-period-calculator-and-interpretation">Average Collection Period Calculator and Interpretation</a>
  3. Although C. C. D. Consultants Inc.'s personnel has verified and validated the Average Collection Period calculator, C. C. D. Consultants Inc. is not responsible for any outcome derived from its use. The use of Average Collection Period calculator is the sole responsibility of the user and the outcome is not meant to be used for legal, tax, or investment advice.

Definitions and terms used in Average Collection Period Calculator

Annual credit sales
The amount of revenue generated by a company after the deduction of returns, allowances for damaged or missing goods and any discounts allowed and sold on credit.
Receivables
Money owed to a company by customers (individuals or corporations) for goods or services that have been delivered or used, but not yet paid for. In it is also known as Sales on credit.

What is Average Collection Period

Average Collection Period represents the average number of days it takes the company to convert receivables into cash.

Average Collection Period formula is:

 Average Collection Period formula

Receivables Turnover Ratio formula is:

 Receivables Turnover Ratio formula

Average collection period measures the average number of days that accounts receivable are outstanding. This activity ratio should be the same or lower than the company's credit terms.

Average Collection Period Analysis

As a rule, outstanding receivables should not exceed credit terms by more than 10-15 days.

If you allow various types of credit transactions, then the average collection period MUST be also calculated separately for each category.

This ratio takes in consideration ONLY the credit sales. If the cash sales are included, the ratio will be affected and may lose its significance. It is best to use average accounts receivable to avoid seasonality effects. If the company uses discounts, those discounts must be taken into consideration when calculate net accounts receivable.

Average Collection Period is figured as days. A popular variant of this ratio is to convert it into receivables turnover ratio in terms of "turnover times".