How to Calculate the Accounts Receivable Cycle

Companies need to keep strict accounts receivable controls.

Your accounts receivable cycle is calculated on a sale-by-sale basis. Each person you sell to will pay at different rates. You typically want your customers to pay quickly. The more efficient your accounts receivables cycle, the less likely you will have customers who do not pay. Other measurables can help with your accounts receivable, such as your days accounts receivable outstanding, which looks at the average number of days it takes to collect on your receivables.

Instructions

1. Start the calculation with the day that you deliver the goods to the customer. For example, assume you sell goods and ship them to the customer on January 1.

2. End the calculation with the day the customer pays for the goods. In the example, assume the customer pays on January 10.

3. Subtract the day you start the calculation from the day you end the calculation. In the example, January 10 minus January 1 equals nine days.

References

• Commercial Carrier University: Chapter 4 Understanding Cash Cycles