Frequently Asked Questions(FAQ)

What’s the average period to collect a receivable?

The average period to collect a receivable is also known as the average collection period. It can be calculated by dividing the company’s average balance of accounts receivable by its net credit sales and multiplying the result by 365 days.

Does the average collection period vary by industry?

Yes, the average collection period does vary by industry. It also depends on the payment deadlines imposed on a company’s invoices: shorter deadlines correlate with shorter collection periods.

What does an average collection period of 30 days mean?

An average collection period of 30 days means that it takes 30 days on average for a company to collect its accounts receivable and convert them into cash.

What are the advantages of using the average collection period?

Keeping track of the average collection period can help business managers to ensure that their companies have enough cash on hand to meet their short-term financial obligations.

About the Authors

Tetiana Sitiugina-Babiuk

Written by: Tetiana Sitiugina-Babiuk

Financial Sector Specialist and Content Strategist

Independent writer, content strategist, and financial sector specialist. Tatiana has an extensive experience in working with financial institutions such as Bank of Canada and Risk Management unit at FinDev Canada. She holds an MA in Financial Risk Management from the University of Toronto.

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