Use the free Accounts Receivable Turnover Calculator on ToolVexa to see how often a business collects its receivables and how long, on average, customers take to pay. Enter net credit sales and the beginning and ending receivables, press Calculate, and the turnover and days sales outstanding appear straight away.
How to Use
Enter net credit sales for the period, then the receivables at the start and at the end of the period. Press Calculate to see average receivables, the turnover ratio and the days sales outstanding.
Formula in Plain Words
Average receivables are the beginning and ending balances added together and divided by two. Turnover is net credit sales divided by average receivables. Days sales outstanding is 365 divided by turnover.
Worked Example
With net credit sales of $500,000, beginning receivables of $60,000 and ending receivables of $40,000, average receivables are $50,000. Turnover is 10.0 times, and days sales outstanding are 36.5 days.
FAQs
What does a high turnover mean? It usually means customers pay quickly, though very high turnover can also reflect strict credit terms.
What does a low turnover mean? It usually means collections are slow or credit terms are long.
Should I use cash sales? No. Only credit sales belong in this ratio, because cash sales never sit in receivables.