One formula for calculating the average collection period 365 days in a year divided by the accounts receivable turnover ratio. Average Collection Period can be calculated by using these formulas. Collection Period 365 Accounts Receivable Turnover Ratio.
Or Collection Period 365 6 61 days approx BIG Company can now change its credit term depending on its collection period.
Assume that a company had on average 40000 of accounts receivable during the most recent year. Average Collection Period can be calculated by using these formulas. The first formula is mostly used for the calculation by the investors and other professionals. Accounts Receivable Payment Period Average Receivables Net Credit Sales 365 days Net Credit Sales 1000000 USD.