1. What is AR Turnover Days?

AR Turnover Days measures the average number of days it takes a company to collect payments from its customers after a sale has been made. It's a key metric for assessing accounts receivable efficiency.

2. How Does the Calculator Work?

The calculator uses the AR Turnover Days formula:

Where:

• AR Turnover — Net credit sales divided by average accounts receivable
• 365 — Number of days in a year

Explanation: The formula converts the AR turnover ratio (which shows how many times receivables are collected per year) into the average collection period in days.

3. Importance of AR Turnover Days

Details: This metric helps businesses evaluate their credit and collection policies. Lower days indicate faster collection, while higher days may suggest collection problems or overly lenient credit terms.

4. Using the Calculator

Tips: Enter your AR Turnover ratio (unitless value). The value must be greater than 0. The calculator will compute the average collection period in days.

5. Frequently Asked Questions (FAQ)

Q1: What is a good AR Turnover Days value?
A: Ideal values vary by industry, but generally 30-45 days is considered good for most businesses. Compare with industry averages for better context.

Q2: How is AR Turnover calculated?
A: AR Turnover = Net Credit Sales / Average Accounts Receivable. You need this value to use this calculator.

Q3: Why use 365 days?
A: This represents one financial year. Some businesses may use 360 days for simplicity in financial calculations.

Q4: What if my AR Turnover Days is increasing?
A: Increasing days may indicate customers are taking longer to pay, which could impact cash flow. Review credit policies and collection procedures.

Q5: Can this be used for personal finance?
A: While primarily for businesses, individuals can use similar concepts to analyze how quickly they collect money owed to them.