Average Collection Period Calculator
Also see Receivables Turnover Calculator.
Average collection period is used to evaluate how long customers take to pay on goods purchased. A shorter collection period is a good sign that the company is doing business with distributors(customers) that are good about paying their bills, a long collection period is a bad sign; keeping in mind the company also has input in this as it may give different terms (i.e. it may give customers 30,60, or even 90 days to pay).
Average Collection Period Formula
Average Collection Period =
Days in Period / Accounts Receivables Turnover
Days in Period / Accounts Receivables Turnover
while Receivables Turnover is calculated by the following:
Receivables Turnover =
Net Credit Sales / Average Account Receivables
Net Credit Sales / Average Account Receivables
What is Average Collection Period
Average collection period is used to evaluate how long customers take to pay on goods purchased. A shorter collection period is a good sign that the company is doing business with distributors(customers) that are good about paying their bills, a long collection period is a bad sign; keeping in mind the company also has input in this as it may give different terms (i.e. it may give customers 30,60, or even 90 days to pay).