HesapHanem

Receivables Turnover Calculator

Find your receivables turnover and DSO.

Result

8.00
45.63 days

How it is calculated

The ratio compares credit sales with the money tied up in unpaid customer invoices: turnover = net credit sales ÷ average receivables, and DSO = 365 ÷ turnover. Net credit sales are the sales made on credit over the period, after returns and discounts; average receivables is normally the opening and closing balance added and halved. Both inputs are in the same currency, and the sales figure must cover a full year because DSO uses a 365-day year. The tool returns nothing if receivables are zero or negative, or if sales are negative or zero.

Worked example

Net credit sales for the year are 1,200,000 and average receivables are 150,000. Turnover = 1,200,000 ÷ 150,000 = 8.00, so the balance is collected about eight times a year. DSO = 365 ÷ 8 = 45.62 days. On average a customer takes a little over six weeks to pay.

Try this example →

Common mistakes

  • Using total sales including cash sales; only sales made on credit belong in the numerator.
  • Entering the year-end receivables instead of the average of opening and closing balances, which distorts the ratio for growing or seasonal businesses.
  • Feeding in quarterly sales while DSO still assumes 365 days; annualise the sales first or the days figure will be about four times too small.
  • Comparing the ratio across industries; a high turnover is not automatically good if credit terms are so strict that customers go elsewhere.
  • Mixing currencies or units, for example sales in thousands and receivables in whole units.

Sources

About this calculator

Accounts receivable turnover is calculated as net credit sales divided by average accounts receivable over a period, showing how many times a company collects its average receivables balance in a year. From it, days sales outstanding (DSO) is derived as 365 / turnover ratio, translating the same efficiency into the average number of days it takes to collect payment after a sale.

Accountants and CFOs use these metrics to monitor how efficiently a company converts credit sales into cash, financial analysts use them to compare working-capital efficiency across companies in the same industry, and credit managers use DSO to spot deteriorating collection performance before it becomes a cash-flow problem. Small business owners also track receivables turnover to judge whether their invoicing and collections practices need tightening.

Was this helpful?

You can pick up to 3 reactions.

Comments (1)

  • Editorial team

    The days line assumes a 365-day year, so feed in a full year of net credit sales with the average receivables for that same year. Then set the days figure next to your payment terms: if terms are 30 days and the result is 46, customers are paying late on average and cash is tied up longer than planned. Cash sales do not belong in the sales figure. What payment terms do you offer your customers?

Popular calculators

Loan Calculator

Monthly payment, total interest and full amortization schedule.

Percentage Calculator

Percent change, percent of, and ratio calculations.

Discount Calculator

Calculate final price, savings, and discount amount.

BMI Calculator

Body mass index from height and weight (metric or imperial).

Age Calculator

Compute your exact age in years, months and days from a birth date.

Compound Interest Calculator

Calculate the final amount and interest earned with compounding.

All Calculators