How do I find the average collection period?

Divide the days in the period by the turnover: 365 ÷ receivables turnover for a year.

Is a high receivables turnover good?

Generally yes, but a very high figure can mean credit terms are so strict that sales are being lost.

What if I only know total sales?

You can use total sales, but the ratio will be overstated if a large share of sales is paid in cash.

Receivables Turnover Ratio Formula

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Accounts Receivable Turnover Calculator

The accounts receivable turnover ratio measures how many times a business collects its average receivables balance during a period. It divides net credit sales by average accounts receivable. A higher ratio means customers pay quickly and less cash is tied up in unpaid invoices.

Formula

Receivables turnover = Net credit salesAverage accounts receivable Collection period = Days in periodReceivables turnover

Where

Net credit sales: sales made on credit, less returns and allowances
Average accounts receivable: (beginning + ending receivables) ÷ 2

Calculator

Net credit sales

Accounts receivable, beginning

Accounts receivable, end

Days in the period

Result and step-by-step solution

Receivables turnover

12.5×

Customers pay, on average, 29.2 days after the sale.

Average receivables
38,000.00 + 42,000.002 = 40,000.00
Divide credit sales by it
500,000.0040,000.00 = 12.5
Average collection period
36512.5 = 29.2 days

How to use the formula

Use credit sales, not total sales, when you can: cash sales never become receivables, and including them overstates the ratio. Net means after returns and allowances. The average collection period, days in the period ÷ turnover, converts the ratio into the average number of days customers take to pay, which is easier to compare with your payment terms.

With net credit sales of 500,000 and receivables of 38,000 at the start and 42,000 at the end of the year, average receivables are 40,000, turnover is 12.5 and the average collection period is 29.2 days. If your terms are 30 days, customers are paying roughly on time; if they are 14 days, collections need attention. The collection period is essentially the same measure as days sales outstanding and feeds the cash conversion cycle.

Frequently asked questions

What is the receivables turnover formula?: Receivables turnover = net credit sales ÷ average accounts receivable.
How do I find the average collection period?: Divide the days in the period by the turnover: 365 ÷ receivables turnover for a year.
Is a high receivables turnover good?: Generally yes, but a very high figure can mean credit terms are so strict that sales are being lost.
What if I only know total sales?: You can use total sales, but the ratio will be overstated if a large share of sales is paid in cash.

Last reviewed: September 26, 2026. Calculations run in your browser and were checked against numpy-financial, SciPy and published spreadsheet examples.