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Accounts Receivable

Accounts Receivable Turnover Calculator

Calculate your receivables turnover ratio from beginning and ending AR, and the days it implies.

Result

Average receivables

$50,000.00

Average days to collect

61 days

AR turnover ratio

6

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How it's calculated

Average receivables = (beginning + ending) ÷ 2. Turnover = net credit sales ÷ average receivables. Days to collect = days in period ÷ turnover.

The accounts receivable turnover ratio shows how many times per period you collect your average receivables. A higher number means customers pay faster. Enter net credit sales, beginning AR and ending AR. The calculator returns average receivables, the turnover ratio and the average days to collect.

The formula

Average AR      = (beginning AR + ending AR) / 2
AR turnover     = net credit sales / average AR
Days to collect = days in period / AR turnover

Use the same period for every input.

Worked example

A business has these figures for one year:

  • Net credit sales: $300,000
  • Beginning accounts receivable: $45,000
  • Ending accounts receivable: $55,000
  • Period: 365 days

Average receivables: ($45,000 + $55,000) / 2 = $50,000

AR turnover ratio: $300,000 / $50,000 = 6

Average days to collect: 365 / 6 = 60.83 days

The business collects its receivables about six times a year. Each invoice waits about 61 days before payment.

How to read the result

Compare days to collect with your payment terms. If you offer net 30 and customers take 61 days, many invoices are paid late. Use the average collection period calculator to see the gap in days.

Keep these points in mind:

  • No universal target. A good ratio depends on your industry, customer mix and terms. Compare it with your own history first.
  • Direction matters. A falling ratio means collection is slowing.
  • Average, not ending. Averaging the start and end balances smooths a single large invoice. It can still hide seasonal peaks. For seasonal sales, use shorter periods.
  • Credit sales only. Cash sales do not create receivables. Including them makes the ratio look better than it is.

Accounting treatment varies by country and by method. Check your approach with an accountant. For the full theory, read the guide on accounts receivable turnover.

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Frequently asked questions

What is a good accounts receivable turnover ratio?
A higher ratio means you collect faster. A good value depends on your industry and your payment terms. Compare your ratio with your own past periods and with businesses of similar size and terms. A ratio that falls over time is an early warning.
How do I calculate accounts receivable turnover?
Divide net credit sales by average accounts receivable. Find the average by adding beginning AR and ending AR, then dividing by two. Use the same period for sales and receivables, such as one quarter or one year.
Is a high receivables turnover always good?
Not always. A very high ratio can mean your credit terms are too strict and you lose sales. It can also come from a low ending balance after a big collection. Review the trend and your terms together.
What is the difference between AR turnover and DSO?
Both measure collection speed. Turnover shows how many times you collect your receivables in a period. DSO and average days to collect convert that into days. Days to collect equals the days in the period divided by turnover.
Should I use total sales or net credit sales?
Use net credit sales. Cash sales never enter accounts receivable, so they distort the ratio. Subtract returns, allowances and discounts from credit sales. If you cannot split cash and credit sales, state that your result is an estimate.