Calculate accounts receivable, net credit sales, or average collection period from any two values in this credit period calculator.
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Credit Period Formula
The credit period calculator is based on the average collection period formula. It connects unpaid invoices, annual net credit sales, and the average number of days it takes to collect payment.
- ACP = average collection period, in days
- AR = accounts receivable or unpaid invoices
- NCS = annual net credit sales
- 365 = number of days in the year
If you need to solve for unpaid invoices instead, the formula is rearranged as:
If you need to solve for annual net credit sales, the formula is rearranged as:
The calculator lets you enter any two values and solves for the missing one:
- If you enter unpaid invoices and net credit sales, it calculates the average collection period.
- If you enter net credit sales and average collection period, it calculates unpaid invoices.
- If you enter unpaid invoices and average collection period, it calculates annual net credit sales.
Average Collection Period Benchmarks
These ranges are general reference points. A normal credit period depends on your industry, customer type, and payment terms.
| Average Collection Period | Common Interpretation |
|---|---|
| Under 30 days | Fast collection, often aligned with short payment terms |
| 30 to 45 days | Common for businesses using net 30 terms with some delayed payments |
| 46 to 60 days | Slower collection and possible cash flow pressure |
| Over 60 days | May indicate overdue accounts, weak collection processes, or long customer terms |
| Input | Use This Value |
|---|---|
| Unpaid invoices / accounts receivable | The current balance customers owe for credit sales |
| Net credit sales | Annual sales made on credit, excluding cash sales, returns, and allowances |
| Average collection period | The average number of days it takes to collect receivables |
Example Problems
Example 1: Calculate the average collection period
You have $50,000 in unpaid invoices and $600,000 in annual net credit sales.
The average collection period is 30.42 days.
Example 2: Calculate unpaid invoices
Your annual net credit sales are $900,000, and your average collection period is 40 days.
The estimated unpaid invoices balance is $98,630.14.
FAQ
What is a credit period?
A credit period is the amount of time customers are allowed or expected to take before paying for a credit sale. In this calculator, it is measured as the average collection period, which shows how many days it takes to collect accounts receivable on average.
Is a lower average collection period better?
Usually, yes. A lower average collection period means you collect customer payments faster, which can improve cash flow. However, the right number depends on your payment terms. If your standard terms are net 60, a 55-day collection period may be reasonable.
Should net credit sales include cash sales?
No. Net credit sales should include only sales made on credit. Cash sales are not part of accounts receivable, so including them can make the average collection period look artificially low.
