The simplest way to calculate average accounts receivable is to add your beginning and ending AR balances and divide by two. For example, beginning AR of $60,000 and ending AR of $80,000 gives an average of $70,000. The calculator above does this, and for a more accurate figure it can average up to 12 monthly balances instead of just two.
Averaging matters because a single balance-sheet snapshot can be misleading if your receivables swing with seasonality. Using monthly balances smooths those swings out. The average AR figure is what feeds the accounts receivable turnover ratio and the average collection period (ACP), also known as days sales outstanding. Enter your balances above, optionally add net credit sales, and you will get your average AR, the number of balances used, and your collection period in days.
Fill in at least two balances. Use just the opening and a closing balance for the quick method, or add monthly balances for a more accurate average. Empty fields are ignored.
(beginning + ending) / 2Average accounts receivable is a small calculation that underpins several important metrics. Get it right and your turnover ratio, collection period, and bad-debt estimates all become more accurate.
Two ways to calculate average AR
There are two accepted methods, and the calculator supports both. Use whichever your data allows.
| Method | Formula | When to use it |
|---|---|---|
| Two-point average | (Beginning AR + Ending AR) ÷ 2 | Quick, good enough when receivables are stable through the period |
| Multi-period average | Sum of monthly balances ÷ number of months | More accurate, best when receivables are seasonal or volatile |
If your sales spike in one quarter, a beginning-and-ending average can over- or understate your true average receivables. Averaging 12 month-end balances captures the real picture, which makes your turnover ratio and collection period far more reliable.
How do I calculate average accounts receivable?
Add your beginning and ending AR balances and divide by two: (beginning + ending) divided by 2. Beginning AR of $60,000 and ending AR of $80,000 averages to $70,000. For a more accurate result, average your month-end balances over the period instead, which is what the multi-period mode above does.
What is average accounts receivable?
Average accounts receivable is the typical amount customers owe you across a period, rather than at a single point in time. It is used in formulas that span a period, such as the turnover ratio and the average collection period, so that a one-day snapshot does not distort the result. A stable, well-managed book keeps this average proportionate to sales.
What is the formula for the average collection period (ACP)?
Average collection period = Average AR ÷ (Net credit sales ÷ 365)
Equivalently, ACP = 365 ÷ AR turnover ratio
ACP is the same metric as days sales outstanding (DSO): the average number of days it takes to collect a receivable. The calculator returns it when you add net credit sales.
How do you calculate ACP?
Divide average accounts receivable by average daily credit sales (net credit sales divided by 365). If average AR is $70,000 and net credit sales are $500,000, daily sales are about $1,370, so ACP is 70,000 divided by 1,370, which is roughly 51 days. You can also get there by dividing 365 by your turnover ratio.
What is a normal range for the average collection period?
For most businesses a healthy ACP is under 45 days, and under 30 days for many small businesses, though it varies widely by industry and credit terms. Sectors with longer billing cycles, such as healthcare and construction, often run higher. Compare your number to your own payment terms first: an ACP well above your stated terms signals slow collections.
Source: ApprovalMax, accounts receivable KPIsWhat is a good AR ratio?
For the AR turnover ratio, which uses this average AR figure, 5 to 10 times per year is a solid general benchmark and higher is better. Use our AR turnover ratio calculator to score yours against your industry once you have your average AR.
Last updated June 9, 2026. This guide is general information, not accounting, tax, or financial advice.