For example, if a company’s average accounts receivable is $50,000 and its total credit sales over a year amount to $500,000, with 365 days in the period, the accounts receivable collection period would be calculated as follows: ($50,000 / $500,000) * 365 = 36.5 days. This indicates that, on average, it takes the company approximately 36.5 days to collect payments from its customers after extending credit.
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Emagia is a leading provider of AI-powered Order-to-Cash (O2C) automation platform that modernizes finance operations for midsize to large global businesses. Many global businesses and shared service centers use Emagia’s Autonomous O2C to transform to digital world-class operations in credit, invoicing and payments, receivables, collections, deductions, cash application and cash forecasting. Emagia solutions improve their customers DSO, cash flow, credit risk, operational cost, compliance and profitability.