Accounts receivable turnover calculator
Receivables turnover shows how many times a business collects its average receivables in a period, and days sales outstanding (DSO) how many days that takes. Enter net credit sales, receivables at the start and the end of the period and its length in days. Add your payment terms to see how many days late customers pay on average.
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How to use it
- Enter net credit sales for the period (after returns and allowances).
- Enter receivables at the start and at the end of the period.
- Enter the days in the period: 365 for a year, 90 for a quarter.
- Optionally add your payment terms in days.
- Average receivables = (start + end) ÷ 2
- Receivables turnover = net credit sales ÷ average receivables
- DSO = days in period ÷ turnover = average receivables ÷ (sales ÷ days)
- DSO − terms = average days customers pay after the due date
Worked example
A year with 500,000 of credit sales, receivables of 40,000 at the start and 60,000 at the end, 30-day terms:
- Average receivables = 50,000.00.
- Turnover = 500,000 ÷ 50,000 = 10.
- DSO = 365 ÷ 10 = 36.5 days, 6.5 days beyond the terms.
A quarter with 120,000 of sales and 10,000 of receivables gives a turnover of 12 and a DSO of 90 ÷ 12 = 7.5 days.
Tips
- With seasonal sales, average monthly receivables give a fairer figure than just the start and end.
- Compare periods of the same length, or use DSO, which already accounts for the length.
- Pair it with inventory turnover and payables to see the whole cash cycle.
Frequently asked questions
How do you calculate accounts receivable turnover?
Receivables turnover = net credit sales ÷ average accounts receivable, where average = (start + end) ÷ 2. Sales of 500,000 with receivables of 40,000 and 60,000 give 500,000 ÷ 50,000 = 10.
How do I get DSO from the turnover?
DSO = days in the period ÷ turnover. A turnover of 10 over a 365-day year means customers take 36.5 days to pay on average.
Should I use total sales or credit sales?
Credit sales: cash sales never become receivables. If only total sales are available, the ratio will look better than it is when part of the sales is paid in cash.
What is a good receivables turnover?
Compare DSO with your payment terms and with your own past periods. A DSO well above the terms means customers pay late or some debts may not be collected.