Average Collection Period Calculator

About Average Collection Period Calculator

The Average Collection Period Calculator is used to calculate the average collection period.

Average Collection Period Definition

Average Collection Period is the approximate amount of time that it takes for a business to receive payments owed, in terms of receivables, from its customers and clients. Companies use the average collection period to assess the effectiveness of a company’s credit and collection policies. It should not greatly exceed the credit term period (i.e. the time allowed for payment). The average collection period is a variant of the receivables turnover ratio.

Formula

The Average Collection Period calculation formula is as follows:

Average Collection Period = No. of days × Average net receivables / Net credit sales

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