The formula for average collection period is when you divide accounts receivables by your daily credit sales. This ratio gives you the length of time it takes for a company to get its cash after a sale or credit is made. What does this tell a business? Well for starters the longer this period is can result in a lot of over due and delinquent bills. To fix this you may need to alter your credit
. policies because slow collections will hurt your profit. For more info visit: http://www.wisegeek.com/what-is-an-average-collection-period.htm .
