Turnover and collection period
Accounts receivable turnover and the average collection period describe the same thing from two directions. Turnover counts how many times a year balances are collected. The collection period converts that into days. BDC describes the average collection period as accounts receivable divided by sales, multiplied by the number of days in the year.
Many businesses use average receivables over the period and only credit sales. BDC’s version uses a single receivables balance and total sales. Both are acceptable if you pick one, label it and use it consistently, because the trend matters more than any one figure.
A worked example
For illustration, a business makes $480,000 of credit sales in a year. Receivables were $50,000 at the start and $70,000 at the end, so the average is $60,000. Turnover is $480,000 divided by $60,000, or 8.0. Dividing 365 by 8.0 gives roughly 46 days to collect.
If the business asks customers to pay within 30 days, 46 days suggests invoices are running late on average, though a few large slow accounts can hide behind a healthy average. All figures are round and illustrative only.
Limits of the measure
BDC suggests that an average collection period of 60 days or less is generally preferable, since faster collection supports liquidity. Your own payment terms are a better yardstick than a general number.
Cash sales distort the result if they are included, and a year-end balance can mislead when sales are seasonal. An average also says nothing about which customers are late, so read it alongside an aged receivables report.
What to discuss with your accountant
Ask which sales and which receivable balances your accountant uses, and whether credit notes, deposits and doubtful balances are recorded correctly. Bring your invoice list, payment terms and any customers you consider slow.
Compare the result with your cash-flow forecast, and with the receivables days tool, to see how collection timing affects what you can pay and when.
Sources & editorial notes
Sources checked October 24, 2026. The examples are illustrative and provide general information. Discuss how the guidance applies to your circumstances with your accountant.
Rules and guidance can change. Use the current official source and confirm the treatment for your facts. To flag an error, contact Sora.