Days in a year : Receivables Turnover:



Average Collection Period =  


Also see Receivables Turnover Calculator.

Average Collection Period Formula

 

Average Collection Period =

Days in a year / Receivables Turnover

 

while Receivables Turnover is calculated by the following:

Receivables Turnover =

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).