Here is an average collection period calculator which estimates how quickly the company is able to collect on its accounts receivable. Enter the company's Accounts Receivable and Revenues and the tool will estimate how quickly the company collects.
Average Collection Period Calculator
What is the average collection period?
The average collection period refers to how long – in days – it takes for a company to collect on its accounts receivable. Accounts Receivable is the total sum of money owed by customers (businesses or consumers) currently extended on credit, and by comparing it to total sales you can quickly guess how efficiently the company collects on these debts.
Although you can calculate it for a quarter, for most businesses it's safer to look at a full year to compare fairly due to seasonality or accounts receivable booked in previous quarters.
Average Collection Period Formula
The average collection period formula is:
average\ collection\ period=\frac{accounts\ receivable}{revenue}*days\ in\ periodWhere:
- Accounts Receivable – Money owed the company on credit for goods or services. From the balance sheet in current assets
- Revenue – Top-line sales the company made in the current period. From the income statement.
- Days in Period – How many days you are looking at for the reporting (that is: how many quarters is revenue summed across, representing how many days?)
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