Average Collection Period Calculator
Calculates the average number of days to collect payment after a sale
Total outstanding accounts receivable balance
Total credit sales over a 12-month period
Average number of days to collect payment
How many times receivables are collected per year
Average credit sales earned per day
Frequently Asked Questions
What is the average collection period?
The average collection period (also called Days Sales Outstanding or DSO) measures how many days it takes on average to collect payment after a sale. It is calculated as (Accounts Receivable / Annual Credit Sales) x 365. A lower number indicates faster collection and better cash flow.
What is a good average collection period?
It depends on your payment terms. If you offer Net 30 terms, an average collection period under 35-40 days is good. A period significantly longer than your terms indicates collection issues. Industry averages range from 20 days (retail) to 60+ days (manufacturing, government contracts).
How can I reduce my average collection period?
Offer early payment discounts (2/10 Net 30), automate invoice reminders, require deposits or progress payments, screen customer credit before extending terms, accept electronic payments, and follow up on overdue invoices within a week. Clear, accurate invoicing also speeds payment.
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