What is the Average Collection Period?
The average collection period measures how many days it typically takes a business to collect cash from customers after making a credit sale. Shorter periods generally mean faster cash flow and lower credit risk.
The Formula
Average Collection Period = (Average Accounts Receivable ÷ Net Credit Sales) × Number of Days in the Period. It’s closely related to the Receivables Turnover Ratio, which equals Net Credit Sales divided by Average Accounts Receivable.
Note: This tool is for general business planning and educational purposes only.
Last reviewed August 2026