Days Accounts Receivable Outstanding
In the Financial Manager, days accounts receivable outstanding is the average number of days the receivables for a company are outstanding. An exact analysis of accounts receivable can only be made by examining the aging of individual accounts.
You can use this measure to provide a broad indication of trends. It also provides some indication of the quality of receivables, as well as an idea of how successful the company is in collecting its outstanding receivables.
The calculation for days accounts receivable outstanding is
where:
Accounts Receivable (A/R) Balance = the sum of all Accounts Receivable account types
Beginning A/R Balance (for the first available period) = the accounts receivable beginning balance entry
Beginning A/R Balance (for all other periods) = the accounts receivable ending balance entry for the previous period
Ending A/R Balance (for the current period) = the accounts receivable balance for the current period as of the date specified in the Date field
Ending A/R Balance (for all other periods) = the ending accounts receivable balance for the period being reported
Sales = the sum of all Income account types
# of Days (for the current period) = the number of days from the beginning of the period to the date specified in the Date field
# of Days (for all other periods) = the number of days in the period
Example
Say that the beginning A/R balance is $126,000 and the ending A/R balance is $140,000. The sum of these figures divided by 2 is $133,000. If sales are $100,000 and days are 30, then sales divided by days is $3,333. The value 1 divided by $3,333 and multiplied by $133,000 results in 39 accounts receivable outstanding days.
The calculation for this example is
