Average Collection Period Calculator

Key Inputs and Versatility in Use:

• Average Accounts Receivable: The average amount customers owe over a specific period.
• Total Credit Sales: The total sales made on credit within the same period.
• These inputs are critical for an accurate calculation of the average collection period.

Applicability Across Finance Domains:

• Primarily used by businesses to analyze the efficiency of their accounts receivable.
• Average Collection Period Calculator can also be adapted for personal finance, especially for individuals managing receivables in their ventures.

The Average Collection Period Calculator is suitable for various time frames, allowing users to assess their collection efficiency on a monthly, quarterly, or annual basis.

ACP = Average Account receivable × Days / Total credit sales

Average Account receivable=(opening balance + closing balance) / 2

Considering a 30-day period, an opening balance to be around 10,000, a closing balance to be around 6,000, and total credit sales to be around 2,000.

ACP = [(opening balance + closing balance) / 2] × Days / Total credit sales

=[(10000+6000)/2]*30/2000

ACP = 120 days

Using the Average Collection Period Calculator regularly, such as monthly or quarterly, is recommended to keep track of collections efficiency and make timely adjustments in credit policies.