What Is the Average Collection Period and Why Is It Important?

Street.Com - 02-19

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In business, companies often have to wait for payments from customers, and that period is generally known as the average collection period. Also known as the average collection period ratio and the ratio of days to sales outstanding, the average collection period is defined as the period of time it takes to collect on a product or services invoice. The "average" component is the formula used to measure the time it takes to get paid measured by days, (expressed in business terms as the "accounts receivable.")