Accounting ratio
Trade receivables collection period
On average, how many days customers take to pay.
What the exam boards say
- Cambridge 0452 and 0985, 2027 to 2029: listed. Formula as printed: Trade receivables / Credit sales x 365 days.
- Cambridge, 2026 syllabus: listed. Formula as printed: Trade receivables / Credit sales x 365 (answer in days).
- Pearson Edexcel 4AC1: not named in the specification.
- OxfordAQA 9215: named as "trade receivable days"; the formula is in OxfordAQA's separate guide, Formulae for accounting ratios.
Cambridge states that for 2027 to 2029 the printed formulas are the only ones accepted in candidate responses, so use the wording above for a Cambridge paper.
Sources: Cambridge IGCSE Accounting 0452: syllabus for 2027-2029 (Version 1), pages 18, 21; Cambridge IGCSE Accounting 0452: syllabus for examination in 2026 (Version 2, December 2025), page 19; Pearson Edexcel International GCSE in Accounting (4AC1) specification (FT Sept 2017) (Issue 1, October 2016), page 21; OxfordAQA International GCSE Accounting (9215) specification (FT Sept 2024) (Version 1.2), page 18. See all sources.
Worked example
(Trade receivables RM6,000 ÷ credit sales RM60,000) × 365 = 36.5 days.
How to interpret it
Shorter is generally better for cash flow. Compare with the credit terms the business offers.
Using it in analysis
The collection period shows how long credit customers take to pay. It is most useful when tracked over several years and compared with a similar business. A period of 30 days means customers settle their accounts in about a month on average.
A rising period is the usual worry, because cash is coming in more slowly. The business may be slack in chasing debts, may have offered longer credit to win sales, or its customers may be short of money. A falling period suggests tighter control and faster cash inflow, though a period that is too strict can turn customers away.
Example: credit sales of RM365,000 and year-end receivables of RM40,000 give (40,000 ÷ 365,000) × 365 = 40 days. The next year credit sales rise to RM400,000 but receivables climb to RM66,000. The period becomes (66,000 ÷ 400,000) × 365, about 60 days. Customers now take around three weeks longer to pay. This ties up cash and raises the risk of unpaid debts, so the extra sales may have come with weaker credit control.
Common mistakes: using total sales instead of credit sales, which understates the period, because cash sales are paid at once. Comparing against a fixed target is also unfair. A firm giving 30 days' credit and one giving 90 days will show different figures, and both may be managing well. The result is an average, so it can hide a few very late payers. A large sale just before the year end can distort it.
Read it with the payables payment period. If customers take 60 days to pay but suppliers must be paid in 30, the business funds a 30-day gap from its own cash, even while trading profitably. Shops selling mostly for cash have few credit customers, so the ratio matters little for them.
Limitations
It uses a year-end figure that may not represent the whole year.
Related ratios
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