Average Collection Period Calculator
Calculate how many days it takes, on average, to collect payment from customers.
How is average collection period calculator worked out?
The average collection period is average accounts receivable divided by net credit sales, multiplied by the days in the period. It is the average number of days between making a sale on credit and receiving the money.
Average Collection Period Calculator
Average collection period
48.7 days
- Days beyond your terms
- 18.7 days
- Collection is running behind the terms you offer.
- Equivalent AR turnover
- 7.50×
Show the working
| Opening receivables | $180,000.00 |
| Closing receivables | $220,000.00 |
| Average receivables | $200,000.00 |
| Net credit sales | $1,500,000.00 |
| Days in period | 365 days |
| Average collection period | 48.7 days |
The average collection period answers the question a business owner actually asks: how long does it take, on average, to get paid? It uses the average receivables balance rather than a point-in-time figure, which makes it steadier than DSO calculated from a closing balance alone.
The formula
Average accounts receivable = (beginning AR + ending AR) ÷ 2
Average collection period = (average AR ÷ net credit sales) × days in periodThis is arithmetically the same as days in the period divided by accounts receivable turnover. The comparison that gives it meaning is your stated payment terms: a collection period materially longer than the terms you offer means the terms are not being observed.
Average collection period, DSO and turnover
All three describe the same underlying relationship between receivables and sales. The average collection period and DSO are both expressed in days and are often used interchangeably; the practical difference is that the collection period conventionally uses an average receivables balance while DSO is frequently computed from the closing balance. Turnover expresses the same thing as a count of cycles. Whichever you report, use the same definition every period — a change of method between periods produces a trend that is entirely an artefact.
The average hides the accounts that matter
A collection period of forty days can mean every customer pays at forty days, or that most pay at twenty-five while two large accounts pay at ninety. Those situations call for completely different responses, and the average cannot distinguish them. Pair the figure with an aging profile and with a look at your largest balances — collection problems in most businesses are concentrated in a handful of accounts rather than spread evenly.
Frequently asked questions
How do you calculate the average collection period?
Divide average accounts receivable by net credit sales for the period, then multiply by the number of days in the period. Average receivables of 200,000 against annual credit sales of 1.5 million gives (200,000 ÷ 1,500,000) × 365, or about 49 days.
Is the average collection period the same as DSO?
They measure the same thing and are often used interchangeably. The usual distinction is that the average collection period uses an average receivables balance across the period, while DSO is commonly calculated from the closing balance.
What is a good average collection period?
One close to the payment terms you offer. If you sell on Net 30 and collect in 35 days, that is working well; collecting in 60 means the terms are not being observed, whatever the industry benchmark says.
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Related calculators
- DSO CalculatorCalculate Days Sales Outstanding to see how accounts receivable compares with credit sales.
- Accounts Receivable Turnover CalculatorCalculate how many times you collect average receivables in a period, and the implied days to collect.
- AR Aging CalculatorEnter outstanding invoices to see current, 1–30, 31–60, 61–90, and 90+ day receivable balances.
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