1. What is Days Sales?

Definition: Days Sales measures the average number of days it takes a company to collect payment after a sale has been made on credit.

Purpose: It helps businesses evaluate the effectiveness of their credit and collection policies and assess cash flow efficiency.

2. How Does the Calculator Work?

The calculator uses the formula:

Where:

• Days Sales — Average collection period (days)
• Accounts Receivable — Outstanding customer balances (currency)
• Net Credit Sales — Total credit sales minus returns (currency)
• Number of Days — Time period being analyzed (typically 365 for annual)

Explanation: The ratio shows what portion of credit sales remains uncollected, scaled to the number of days in the period.

3. Importance of Days Sales Calculation

Details: Lower values indicate faster collections and better cash flow. Comparing to industry benchmarks helps evaluate performance.

4. Using the Calculator

Tips: Enter accounts receivable amount, net credit sales for the period, and number of days (default 365). Net credit sales must be > 0.

5. Frequently Asked Questions (FAQ)

Q1: What's a good Days Sales value?
A: It varies by industry, but generally under 45 days is good, while over 60 may indicate collection problems.

Q2: Should I use annual or quarterly data?
A: For annual analysis use 365 days, for quarterly use 90 or 91 days. Be consistent with your time periods.

Q3: What if I don't have net credit sales data?
A: You can use total sales, but this will be less accurate if cash sales are significant.

Q4: How can I improve my Days Sales?
A: Implement stricter credit policies, offer early payment discounts, or improve collection processes.

Q5: Is a very low Days Sales always good?
A: Extremely low values might indicate overly strict credit policies that could be limiting sales growth.