Average Collection Period Advantages Examples with Excel Template

collection period

For example, if analyzing a company’s full year income statement, the beginning and ending receivable balances pulled from the balance sheet must match the same period. Accounts receivable represent sales that have not yet been collected as cash. You sell your merchandise or services in exchange for a customer’s promise to pay you at a certain time in the future.

collection period

Therefore, the Consumer Price Index (specifically the R-CPI-U-RS) is used to adjust the data for inflation. This example illustrates that there can be changes in the 1-year data that are not evident in the 5-year data. As a result, it can be misleading to compare overlapping 5-year periods. In this example, comparing the overlapping periods may suggest that there was a consistent upward trend over the decade. However, this comparison fails to show that 2016 actually showed a decrease from 2015 and the slope of the upward increase is greater in the 1-year estimates than the 5-year estimates. The American Community Survey (ACS) helps local officials, community leaders, and businesses understand the social, housing, economic and demographic changes taking place in their communities.


Accounts receivable is a business term used to describe money that entities owe to a company when they purchase goods and/or services. AR is listed on corporations’ balance sheets as current assets and measures their liquidity. As such, they indicate their ability to pay off their short-term debts without the need to rely on additional cash flows. The accounts receivable aging schedule is a listing of the customers making up your total accounts receivable balance.

Retirement accounts require 100% of the proposed trade’s value at the time the trade is placed. Normally at least 99.5% of the fund’s total assets are invested in cash, U.S. Government securities and/or repurchase agreements law firm bookkeeping that are collateralized fully (i.e., collateralized by cash or government securities). Government securities are sponsored or chartered by Congress, but their securities are neither issued nor guaranteed by the U.S.

Are all of Fidelity’s products and services available to customers residing outside of the United States?

The resulting number is the average number of days it takes you to collect an account. Using this calculation, you can discover how long it takes to collect from the time the invoice is issued to the time you get paid. If the number is on the high side, you could be having trouble collecting your accounts. A high average collection period ratio could indicate trouble with your cash flows. You can understand how much cash flow is pending or readily available by monitoring your average collection period. Measuring this performance metric also provides insights into how efficiently your accounts receivable department is operating.

In order to calculate the average collection period, the company’s accounts receivable (A/R) carrying values from its balance sheet are needed along with its revenue in the corresponding period. Alternatively, you can calculate the average collection period by dividing the number of days of a given period by the receivable turnover ratio. By understanding the accounts receivable collection period, businesses can identify any issues that may lead to cash flow problems and take steps to address them. Key performance metrics such as accounts receivable turnover ratio can measure your business’s ability to collect payments in a timely manner, and is a reflection of how effective your credit terms are.

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