Average Accounts Receivable Help

Where:
Beginning AR = accounts receivable at the beginning of a given period
Ending AR = accounts receivable at the end of a given period

Average Accounts Receivable is the average of a party's accounts receivable (the amount of money that the party is owed by another party) of any given period.

Since the value of one's accounts receivable can fluctuate quite often, people avoid unnecessary trouble by taking the average of the AR at the beginning and end of a certain period. This is done as opposed to adding the AR of each separate day and dividing that by the amount of days involved (unless the average of only a few days is needed.)

One might want to calculate his/her accounts receivable value of a certain period of time to compare it to another period of time. It is thought that the lower the amount of accounts receivable is, the better the organization/owner of the organization is doing.

Therefore, if Sally's average AR in July was $1,456 and now, in January, it's $679 it may mean her business has improved (or it may mean that her clients simply tend to owe her more in the summer than in the winter because of vacations and preparation for the school season.)

To use our Average Accounts Receivable calculator, type the AR of the beginning of any given period in the box labeled "Beginning Accounts Receivable" and of the end of the period in the box labeled "Ending Accounts Receivable" and press "Calculate Average."