The Collection Percentage Calculator is a tool designed to measure the efficiency of a business’s accounts receivable process. It calculates the percentage of total accounts receivable that has been successfully collected over a specific period. By providing a clear insight into collection efficiency, this calculator helps businesses identify gaps in their receivables management and take corrective actions. It belongs to the category of financial performance tools, offering key metrics for maintaining healthy cash flow and operational efficiency.
Formula of Collection Percentage Calculator
The Collection Percentage is calculated using:
Collection Percentage = (Total Collections / Total Accounts Receivable) * 100
Where:
- Total Collections: The total amount of money collected from accounts receivable during the period.
- Total Accounts Receivable: The total outstanding accounts receivable for the same period.
The result is expressed as a percentage, with a higher collection percentage indicating better performance in receivables management.
Pre-Calculated Table for Common Scenarios
Here’s a reference table for typical collection percentages across various businesses:
| Total Collections | Total Accounts Receivable | Collection Percentage (%) | Efficiency Level |
|---|---|---|---|
| $80,000 | $100,000 | 80% | Moderate |
| $90,000 | $100,000 | 90% | Good |
| $95,000 | $100,000 | 95% | Excellent |
| $70,000 | $100,000 | 70% | Needs Improvement |
| $60,000 | $100,000 | 60% | Poor |
This table offers a quick benchmark to assess collection efficiency.
Example of Collection Percentage Calculator
Let’s calculate the collection percentage for a business with the following details:
- Total Collections: $85,000.
- Total Accounts Receivable: $100,000.
Step 1: Apply the Formula
Collection Percentage = (Total Collections / Total Accounts Receivable) * 100
Step 2: Substitute the Values
Collection Percentage = ($85,000 / $100,000) * 100
Collection Percentage = 85%.
Interpretation
A collection percentage of 85% indicates that the business has collected a substantial portion of its accounts receivable but still has room for improvement to achieve higher efficiency.
Most Common FAQs
A collection percentage of 90% or higher is generally consider good, as it reflects effective accounts receivable management and timely collection practices.
To improve collection percentage, businesses can:
Offer early payment discounts to incentivize prompt payments.
Send timely reminders for overdue invoices.
Strengthen credit policies and conduct credit checks before extending credit.
Regularly follow up with customers who have outstanding balances.