With the illustrative inputs below, the result is 18 days.
Try this with your own numbersFormula and worked example
Collection days = receivables / credit sales × period days
| Input | Example |
|---|---|
| Average trade receivables | 20,000 |
| Credit sales in period | 100,000 |
| Days in period | 90 days |
| Calculated result | 18 days |
Choose reliable inputs
Account for delivery time, review work and when you expect to be paid for each engagement. For this consulting firm calculation, use time sheets, engagement scopes and invoice ageing and a consistent definition of one engagement.
- Delivery hours: include the portion belonging to this engagement or reporting period, and record where the value came from.
- Preparation: include the portion belonging to this engagement or reporting period, and record where the value came from.
- Travel: include the portion belonging to this engagement or reporting period, and record where the value came from.
Use the same currency for every money input. Do not mix weekly costs with monthly revenue, or count the same expense in both an itemised cost and allocated overhead.
Should cash sales be in this denominator?
Cash sales do not create trade receivables. Including them can make collection time look artificially short.
Use credit sales and average receivables from the same accounting period.
What if this input changes?
If average trade receivables rises by 10%, this example changes by 1.8 days. This shows the effect of one change; it does not predict what will happen.
Open the calculator, save your baseline, then change the input supported by the least reliable estimate in your records. Compare both scenarios before committing to a price or capacity promise.