Average Collection Period Calculator
Average Collection Period Formula
Days in a year / Receivables Turnover
while Receivables Turnover is calculated by the following:
Net Credit Sales / Average Account Receivables
What is Average Collection PeriodAverage 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).
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