Accounts Receivable Days Calculator
**This is a basic calculator and does not accept commas. When entering values, just enter the numbers.
**This calculator assumes 365 days in a year.
Accounts Receivable Days Formula
Accounts Receivable Days =
(Accounts Receivable / Annual Revenue) * 365 days
(Accounts Receivable / Annual Revenue) * 365 days
What is Accounts Receivable Days?
It is important to note that accounts receivables is listed on the balance sheet as a current asset. Accounts receivable days is an accounting measure of how long it takes customers to pay an invoice. This ratio is primarily used to evaluate how well a business is collecting credit debt from customers, and indirectly it tells a company how well it is selecting its customers that it extends credit to. Unlike many receivables measures this calculation does not take the average receivables, but instead takes into consideration all outstanding receivables for a point in time.
At times a business will use this ratio to evaluate individual customers, to see how they are doing over time. If the results of the evaluation of a customer shows that their accounts receivable days are increasing, this could be an indication that the customer is having financial issues. It is also useful to compare this metric agains the business payment terms policy. If the results of this ratio is longer than the standard policy the company has implemented, then the business could act on this and seek to improve their collection efforts.
Accounts Receivable Days Example
Shoeburger Corp, a small business that sells burgers to local fast food restaurants, has a receivables balance of $200,000 on December 31. The company had annual sales of $2,200,000 for the year. To solve this, we do the following:
First divide receivables balance by annual sales
$200,000/$2,200,000 = .09
Next take the results from the previous step and multiply by the number of days in a year (365 days):
.09 * 365 = 33.18 days
This means Shoeburger is collecting their receivables approximately 33 days, or suppliers are paying their debts in about 33 days.