Collection Period Calculator

The collection period is simply how long it takes customers to pay for sales on credit.

Definition Collection period equals average accounts receivable divided by credit sales times 365.
Average accounts receivable is total of accounts receivable at the beginning and end of the year divided by two.
Credit sales includes all sales except for returned merchandise and cash sales.
Collection Period Calculator
Accounts Receivable at the beginning of the year $
Accounts Receivable at the end of the year $
Credit Sales $
Collection Period

Working with your collection period

Collecting your accounts receivable is probably your most important source of cash. Establishing terms of payment at the time of sale and including those terms on your invoices may prompt customers to pay sooner. You may also want to consider charging interest on past due accounts to motivate payment and compensate you for the use of your funds.

By monitoring changes in your collection over time, you can better understand the financial dynamics of your business and run it more effectively. Here is a worksheet you can use to track changes in this and other important measures.