Wiki A/R Days

[CatchTheWind]

What is the standard way to figure the "days" in A/R days:

Based on calendar days or working days?
Based on average daily charges or average daily income?
Averaged over the past month, past quarter, past six months, or past year?

 

[Peter Davidyock]

Almost all would/could apply except maybe the average daily income.
Here is the formula I use:

Beginning A/R (for period) + Ending A/R ( for same period) Divided by 2 = average A/R

Net Sales Divided by Average A/R = A/R turnover

Period you are looking at (wk, mo, qtr, yr) Divided by Average A/R turnover = Days in A/R

Beginning A/r + Ending A/R/2= Average A/R
Net/Average A/R= A/R Turnover
Period/A/R Turnover=Days

Hope this helps.

 

[bholmescpc]

I run a Practice Management/RCM company and this is the industry (MGMA, etc.) standard:

1. Days in A/R is based on calendar days
2. Based on average daily charges (gross charges if that is what goes into A/R.) Some systems take off the contractual on the front end and net charges goes into A/R. You need to know how your system is calculating in order to know which number to use.
3. A/R is a moving target so you don't "average" days in A/R. You can calculate days in A/R at certain times (usually at month end), then track over time to see how you are doing.

B.