Average collection period: Meaning and Definition

What does average collection period mean?

Average collection period is another name for Days Sales Outstanding (DSO). Days Sales Outstanding measures the average number of days a business takes to collect payment after a sale, indicating the efficiency of its accounts receivable process.

The two names mean the same thing. You will see "average collection period" in some ledgers, reports and contracts and "DSO" in others. The full entry covers how it works, with examples.

Read the full definition of Days Sales Outstanding (DSO)

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From the glossary

Related terms.

Collections and DSO Days Sales Outstanding (DSO) Days Sales Outstanding measures the average number of days a business takes to collect payment after a sale, indicating the efficiency of its accounts receivable process. Also called debtor days, average collection period, receivable days Accounts payable Accounts Payable (AP) Money a business owes to its suppliers and vendors for goods or services received but not yet paid for. Also called trade payables, sundry creditors, payables Invoice processing Invoice Management The end-to-end process of creating, receiving, tracking, approving, and processing invoices for timely payments and accurate financial records. Also called invoice processing, invoice handling, invoice workflow Due dates and calendars Financial Year (FY) The 12-month accounting period from April 1 to March 31 used for tax filings, financial reporting, and statutory compliance in India. Also called accounting year, tax year Financial reporting Balance Sheet A financial statement that presents a company's total assets, liabilities, and shareholders' equity at a specific point in time. Also called statement of financial position, statement of assets and liabilities Working capital Invoice Factoring Invoice factoring is a financial arrangement where a business sells its outstanding invoices to a third party (factor) at a discount in exchange for immediate cash. Also called factoring, receivables factoring

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