Enter the total unpaid invoices and the total revenue for a period into the calculator to determine the credit period.
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Credit Period Formula
The following formula is used to calculate a credit period.
CP = 365 * (UI / SR)
- Where CP is the credit period (days)
- UI is the unpaid invoices for the period ($)
- SR is the sales revenue for the period ($)
To calculate the credit period, divide the unpaid invoices by the sales revenue, then multiply the result by 365.
What is a credit period?
Definition:
A credit period is a measure of the total average time a company has to pay its bills, or similarly, the total amount of time a company gives its customers to pay its bills.
How to calculate credit period?
Example Problem:
The following example outlines how to calculate an average credit period.
First, determine the total unpaid invoices for a time period. In this example, there are $20,000.00 in unpaid invoices.
Next, determine the sales revenue in the same period. The sales revenue for the period is $250,000.00.
Finally, calculate the average credit period using the formula above:
CP = 365 * (UI / SR)
CP = 365 * (20,000 / 250,000)
CP = 29.2 days
