The Average Collection Period Calculator is used to calculate the average collection period.
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.
The Average Collection Period calculation formula is as follows:
Average Collection Period = No. of days × Average net receivables / Net credit sales