Business Accounts Receivable Days

Sageworks
February 28, 2017
Read Time: min

What it is, how it’s calculated, and why it’s important to small business owners.


Calculation

Accounts Receivable Days = (Accounts Receivable ÷ Annual Revenue) × 365 Days


Definition

Accounts Receivable Days is the number of days until a company gets paid for its products or services. It is calculated by dividing Accounts Receivable (total money owed to the company) by Annual Revenue and then multiplying that by the number of days in a year.


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How it is Used

Accounts Receivable Days is useful in determining how well a business collects payments from its customers. Typically, businesses aim to decrease Accounts Receivable Days as a way of maximizing the amount of cash they have on hand at any given point in time.


Ways to Improve Accounts Receivable Days

A great way to improve Accounts Receivable Days is to offer different credit terms to different customers based upon the riskiness of their credit profile. Customers with riskier credit profiles should be asked to pay up front. Another way to improve Accounts Receivable Days is to selectively increase prices for products or services when possible. If done effectively, this can boost both cash flow and net profit margins.

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About the Author

Sageworks

Raleigh, N.C.-based Sageworks, a leading provider of lending, credit risk, and portfolio risk software that enables banks and credit unions to efficiently grow and improve the borrower experience, was founded in 1998. Using its platform, Sageworks analyzed over 11.5 million loans, aggregated the corresponding loan data, and created the largest real-time database of private-company financial information in the United States. The company was acquired in 2018 and is now part of Abrigo.

Full Bio

About Abrigo

Abrigo is a leading technology provider of compliance, credit risk, and lending solutions that community financial institutions use to manage risk and drive growth. Our software automates key processes — from anti-money laundering to fraud detection to lending solutions — empowering our customers by addressing their Enterprise Risk Management needs.

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