What Is a Collection Period?

Receipt floating period refers to the time interval from the start of customer payment to the receipt of funds by the enterprise.

Receipt floating period

Right!

Receipt floating period refers to the time interval from the start of customer payment to the receipt of funds by the enterprise.

The floating period of receipts is mainly caused by paper-based payment instruments, and there are three types: ^[1]

Example: A company's mailing floating period is 5 days, the processing floating period is 1 day, and the capital availability floating period is 2 days. Then the company's receiving floating period is 8 days. ^[1]

It is extremely important for the company to speed up the cash income and reduce the collection period. Companies can benefit from the reduction in floating periods. For example, if a company deposits 50,000 yuan a day on average, and the floating period of the receipt can be reduced by 2 days, the company can spend 100,000 yuan more for other purposes. At an interest rate of 8%, the company can use these funds to Save 8,000 yuan. The higher the interest rate, the more savings; the lower the interest rate, the less savings. ^[1]

The loss caused by the floating period of receipts is also an important factor to be considered. If the collection time is extended, the company will lose the interest on funds that can be received if the collection time is not extended. For example, if the collection time is increased by 2 days, the company will cause a loss of 8,000 yuan in the floating period of the collection.