Accounts Receivable Turnover Calculator
On average customers pay about 30 days after the sale. Compare it with your payment terms.
How the accounts receivable turnover calculation works
Average the receivables
Add accounts receivable at the start and end of the period and divide by 2. ($45,000 + $55,000) ÷ 2 = $50,000.
Divide net credit sales by average AR
$600,000 ÷ $50,000 = 12, so you collect your receivables 12 times a year.
Turn it into days
Days sales outstanding = 365 ÷ turnover. 365 ÷ 12 = 30.4 days for the average invoice to be paid.
Compare with your terms
If you invoice on net 30 and DSO is 45 days, customers are paying late and cash is tied up.
Worked example. With $600,000 of net credit sales and receivables of $45,000 at the start and $55,000 at the end, AR turnover is 12.00× and days sales outstanding is 30.4 days.
Accounts Receivable Turnover FAQ
What is the accounts receivable turnover formula?
AR turnover = net credit sales ÷ average accounts receivable. Average AR is the start and end balances added together and divided by 2. With $600,000 of credit sales and $50,000 average AR, turnover is 12.
What is a good accounts receivable turnover ratio?
Higher means faster collection, so judge it against your payment terms. On net 30 terms, a turnover near 12 (about 30 days) means customers pay on time. For a rough industry view, NYU Stern (Damodaran) receivables-to-sales ratios for US listed companies, January 2026, work out to about 8 turns (45 days) across all non-financial firms, 5.4 turns (67 days) for business and consumer services, 3.6 turns (100 days) for engineering and construction, and about 29 turns (13 days) for general retail, where most sales are paid at the till. These use year-end receivables and total sales, and small firms can differ a lot.
What is the DSO formula?
Days sales outstanding (DSO) = days in the period ÷ AR turnover. Written another way, DSO = average accounts receivable ÷ net credit sales × days. $50,000 ÷ $600,000 × 365 = 30.4 days. DSO is the average number of days it takes to collect payment after a sale.
Is DSO the same as the average collection period?
Yes. The average collection period uses the same formula, average receivables ÷ net credit sales × days, so it gives the same answer as DSO.
How do I calculate turnover and DSO for a quarter?
Use the quarter's credit sales and set the days to 90. With $150,000 of credit sales and $50,000 average AR, turnover is 3 for the quarter and DSO is 90 ÷ 3 = 30 days. Don't compare a quarterly turnover with an annual one.
Should I use total sales or credit sales?
Use credit sales, because cash sales never become receivables. If you can't separate them, total sales will overstate turnover.
How can I improve AR turnover?
Invoice promptly, offer easy online payment, send reminders before the due date, and consider a small early-payment discount.
Sources: NYU Stern (Damodaran): Working capital ratios by sector, US, January 2026