A collection period is the average number of days that pass between delivering an invoice and receiving the money.

The formula is:

=(Accounts_receivable_balance*360)/(Sales_on_credit*12)

Be sure to read up on accounts receivable as well, and check out How to Read Your Business’s Balance Sheet and The Key Elements of the Financial Plan.

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Bplans GlossaryBplans Glossary

At Bplans, it's our goal to make it easy for you to start and run your business. Our glossary of common business terms will help you learn about key small business and entrepreneurship topics, to help you plan, fund, and grow your business.