1. What is AR Turnover Days?

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

2. How Does the Calculator Work?

The calculator uses the AR Turnover Days formula:

Where:

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

Explanation: The formula converts the accounts receivable turnover ratio (which shows how many times AR is collected per year) into days, making it easier to interpret.

3. Importance of AR Turnover Days

Details: This metric helps businesses understand their cash conversion cycle, assess credit policies, and identify potential collection problems. Lower days generally indicate more efficient collections.

4. Using the Calculator

Tips: Enter your AR Turnover Ratio (must be greater than 0). The calculator will compute the average number of days it takes to collect receivables.

5. Frequently Asked Questions (FAQ)

Q1: What is a good AR Turnover Days value?
A: It varies by industry, but generally 30-45 days is considered good. Compare with industry averages for meaningful analysis.

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

Q3: Why use 365 days?
A: This standardizes the calculation to an annual basis regardless of the actual period measured (though some use 360 days for simplicity).

Q4: What if my AR Turnover Days is increasing?
A: Increasing days may indicate slower collections, more lenient credit terms, or problems with specific customers.

Q5: How can I improve my AR Turnover Days?
A: Strategies include stricter credit policies, early payment discounts, better invoicing processes, and more aggressive collections.