Accounts Receivable Collection Rate Calculator

How to calculate AR Collection Rate?

The collection rate measures the effectiveness of your credit and collection department in converting invoices into cash.

Formula: Collection Rate = (Total Amount Collected / Total Amount Invoiced) × 100

Using the Collection Rate calculator: an example

If a consulting firm issues invoices totaling $50,000 and collects $45,000 within the same month.

Step-by-step calculation:

1. Identify total invoiced amount ($50,000)
2. Identify total collected amount ($45,000)
3. Divide collected by invoiced (0.90)
4. Multiply by 100 to get the rate (90%)

Frequently Asked Questions

What is a good collection rate?

Aim for 95% or higher, though industry standards vary.

How often should I calculate this?

Monthly calculation is recommended for tracking trends.

Does this include old debt?

This specific rate usually tracks collections against invoices issued in the same period.