What's a good collection period?
15-30 days is excellent. 30-45 days is average. >60 days indicates collection problems. Varies by industry: B2B 30-60 days, retail 0-15 days, professional services 30-45 days.
Calculator
Enter your values
Current balance owed by customers
Analysis
Interpretation of the current calculator output
Enter values to see detailed analysis and insights.
How to Use
Step-by-step instructions
- 1Enter accounts receivable balance
- 2Input annual credit sales
- 3Review average collection period
- 4Compare with 30-day benchmark
- 5Lower days = better cash flow
Collection Period Formula
Measures average days to collect payment. Lower is better for cash flow. Target: 15-30 days for most businesses.
Average Collection Period = Accounts Receivable ÷ (Credit Sales ÷ 365)Variables:
Accounts ReceivableMoney owed by customersCredit SalesAnnual sales on creditCollection PeriodDays to collect paymentExample
Business Receivables Example
Inputs:
Accounts Receivable:$50,000
Annual Credit Sales:$600,000
Steps:
- 1.Daily credit sales = $600,000 ÷ 365 = $1,644
- 2.Collection period = $50,000 ÷ $1,644 = 30.4 days
- 3.Benchmark: <30 days is good
- 4.Result: Slightly slow - tighten credit terms
Result:
30.4 days to collect - near benchmark, room for improvement
Frequently Asked Questions
How do I reduce collection period?
Invoice immediately, offer early payment discounts, automated reminders, require deposits, net 30 terms (not 60/90), credit checks, consistent follow-up, use collection agency for delinquents.
Why does collection period matter?
Cash flow! Faster collections = more cash for operations, less borrowing, lower interest costs. 30-day improvement on $600k sales = $50k more cash available. Critical for small business survival.