📊 Average Collection Period Calculator
Calculate days to collect receivables
Current outstanding receivables
Total credit sales for the period
Number of days in the period (365 for annual, 90 for quarterly)
How to Use This Calculator
Enter Accounts Receivable
Input the total amount of outstanding accounts receivable (money owed to you by customers).
Enter Credit Sales
Input the total credit sales for the period you're analyzing. This should match the period in days.
Enter Period
Specify the number of days in your analysis period (365 for annual, 90 for quarterly, 30 for monthly).
Review Results
Examine the average collection period to understand how quickly you're collecting payments from customers.
Formula
Average Collection Period (Days Sales Outstanding):
Average Collection Period = (Accounts Receivable / Credit Sales) × Period (days)
Receivables Turnover:
Receivables Turnover = Credit Sales / Accounts Receivable
Daily Sales:
Daily Sales = Credit Sales / Period (days)
Example 1: Annual Analysis
Accounts Receivable: $50,000, Annual Credit Sales: $500,000, Period: 365 days
Average Collection Period: ($50,000 / $500,000) × 365 = 36.5 days
Receivables Turnover: $500,000 / $50,000 = 10x per year
Daily Sales: $500,000 / 365 = $1,369.86 per day
Example 2: Quarterly Analysis
Accounts Receivable: $75,000, Quarterly Credit Sales: $300,000, Period: 90 days
Average Collection Period: ($75,000 / $300,000) × 90 = 22.5 days
Receivables Turnover: $300,000 / $75,000 = 4x per quarter
Daily Sales: $300,000 / 90 = $3,333.33 per day
About Average Collection Period Calculator
The Average Collection Period Calculator (also known as Days Sales Outstanding or DSO) helps businesses measure how efficiently they collect payments from customers. This critical cash flow metric shows the average number of days it takes to convert accounts receivable into cash, helping you optimize credit policies, manage cash flow, and identify collection issues early.
When to Use This Calculator
- Cash Flow Management: Understand how long it takes to collect receivables and plan cash flow
- Credit Policy Review: Evaluate the effectiveness of your credit terms and collection policies
- Customer Analysis: Identify customers with slow payment patterns
- Financial Reporting: Include collection period metrics in financial reports and analysis
- Performance Benchmarking: Compare collection efficiency against industry standards
Why Use Our Calculator?
- ✅ Quick Calculation: Instantly calculate average collection period from your financial data
- ✅ Flexible Periods: Calculate for any time period - daily, weekly, monthly, quarterly, or annual
- ✅ Additional Metrics: Shows receivables turnover and daily sales for comprehensive analysis
- ✅ Clear Results: Easy-to-understand display of collection period in days
- ✅ Cash Flow Insights: Helps identify cash flow issues before they become problems
- ✅ Free Tool: No cost for essential financial analysis
Common Applications
- Accounts Receivable Management: Monitor collection efficiency and optimize AR processes
- Credit Policy Development: Set appropriate credit terms based on collection patterns
- Customer Segmentation: Identify which customer groups pay faster or slower
- Seasonal Analysis: Track collection periods across different seasons or business cycles
Tips for Best Results
- Use Consistent Data: Ensure accounts receivable and sales figures are from the same period
- Include All Credit Sales: Don't exclude cash sales from the calculation, but use credit sales only
- Average Receivables: For more accuracy, use average receivables (beginning + ending) / 2
- Regular Monitoring: Calculate collection period regularly to track trends and identify issues
- Industry Comparison: Compare against industry benchmarks (typically 30-45 days is good)
Frequently Asked Questions
What's a good average collection period?
A good collection period depends on your industry and credit terms. Generally, 30-45 days is considered good. If your standard terms are Net 30, a collection period around 30-35 days is reasonable. Lower is better for cash flow.
Should I include cash sales in credit sales?
No, only include credit sales (sales on account) in the calculation. Cash sales don't create receivables, so they shouldn't be included in the average collection period calculation.
What if my collection period is increasing?
An increasing collection period may indicate customers are paying slower, credit policies need tightening, or collection efforts need improvement. Investigate the root cause and take corrective action.
How does this differ from receivables turnover?
Receivables turnover shows how many times receivables are collected per period. Average collection period shows the same information in days. They're related: Collection Period = Period Days / Receivables Turnover.
Should I use average receivables or ending receivables?
For more accuracy, use average receivables (beginning + ending) / 2. However, ending receivables is acceptable and often used for simplicity. This calculator uses ending receivables, but you can manually calculate with averages if preferred.
What if I have seasonal sales?
For seasonal businesses, calculate collection period separately for each season. Annual averages may be misleading. Compare periods year-over-year rather than using mixed seasonal data.