Average Collection Period Calculator
Calculate the average number of days it takes to collect payments from customers.
Accounts Receivable
AR balance at the start of the period
AR balance at the end of the period
Sales & Period
Total credit sales for the period
Number of days in the period
Your standard credit terms
Collection Analysis
Average AR:
$0.00
Collection Period:
0 days
AR Turnover Ratio:
0.00
Collection Status:
-
Business Insights
Collection Benchmarks
Ideal: Below credit terms | Warning: >1.33x credit terms
Cash Flow Impact
Longer collection periods reduce available cash
Warning Signs
Collection period > 40 days or turnover ratio < 9
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How do you calculate the average collection period?
The average collection period is calculated using the formula: ACP = (Average Accounts Receivable ÷ Net Credit Sales) × Number of Days in Period. For example, if your average accounts receivable is $50,000, net credit sales are $600,000, and you're calculating for a year (365 days), the ACP would be ($50,000 ÷ $600,000) × 365 = 30.4 days.
How is ACP calculated?
ACP (Average Collection Period) is calculated by dividing average accounts receivable by daily credit sales. The formula is: ACP = Average Accounts Receivable ÷ (Annual Credit Sales ÷ 365). This shows how many days it takes, on average, to collect payment from customers after making a credit sale.
Is average collection period good or bad?
Whether an average collection period is good or bad depends on your industry and payment terms. Generally, shorter periods (15-30 days) are better as they improve cash flow. If your ACP exceeds your payment terms significantly (e.g., 45 days when terms are net 30), it indicates collection issues that need addressing.
When determining the average collection period?
When determining the average collection period, use consistent time periods (monthly, quarterly, or annually), ensure accurate accounts receivable data, include only credit sales (exclude cash sales), and calculate average accounts receivable using beginning and ending balances. Consider seasonal variations and compare against industry benchmarks for meaningful analysis
What factors affect average collection period?
Key factors include payment terms offered to customers, credit policies, collection procedures, customer payment habits, economic conditions, industry standards, invoice accuracy, and follow-up processes. Poor credit screening, unclear payment terms, and weak collection efforts typically result in longer collection periods and cash flow challenges.
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