How this calculator works
The average collection period answers how many days of credit sales sit in receivables. Average the opening and closing receivable balances, divide by net credit sales and multiply by the number of days in the period. If you already know the receivables turnover ratio, the same answer is simply the number of days divided by the turnover. Compare the result with your stated credit terms: a period much longer than the terms suggests slow payment or weak credit control.
Formula
Average receivables = (opening + closing) / 2. Collection period = average receivables / net credit sales × days. Equivalent form: collection period = days / receivables turnover.
Worked example
Opening receivables of $40,000 and closing receivables of $60,000 average $50,000. With $400,000 of net credit sales over 365 days the collection period is 50,000 / 400,000 × 365 = 45.625 days and turnover is 8. Dividing 365 days by a turnover of 8 gives the same 45.625 days.
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Frequently asked questions
Is this the same as A/R days or DSO?
Yes. Average collection period, A/R days and days sales outstanding are different names for the same measure: average receivables divided by credit sales, scaled to the days in the period. This page also accepts a turnover ratio so you can reach the same answer without the raw sales total.
Should cash sales be included?
No. Only credit sales create receivables. Including cash sales shrinks the ratio and makes collections look faster than they are.
What is a good collection period?
A period close to your invoice terms is healthy. Thirty-day terms with a 45-day period means customers pay about two weeks late on average. Seasonal businesses should compare like periods.