How it works
Divide total outstanding A/R by average daily charges, where average daily charges are gross charges for a recent period — often three or six months — divided by the number of days in that period. A practice with $240,000 in A/R and average daily charges of $8,000 has 30 days in A/R.
Why it matters
It is a quick measure of how fast money comes in. But it moves with charges as well as collections: a slow month of charges raises it even if nothing changed in billing. Read it with the A/R aging, and compare it with your own history using the same calculation, since organizations calculate it in different ways.
Example
Days in A/R rises after a provider leaves. Charges fell, so the ratio rose, but the aging shows collections are steady. Nothing is wrong with billing. For ways to reduce the number, see reducing days in A/R.