Contractor Finance Glossary
What is Collection Rate?
Also called: cash collection rate, 30-day collection rate
Collection rate is the share of invoiced revenue you actually collect within a set window, usually 30 days, calculated as cash collected divided by amount invoiced for that period.
DSO tells you the average age of your receivables, but it blends everything together and lags by a full cycle. Collection rate asks a sharper question: of everything you billed, how much showed up as cash inside the window that matters. It is the number that separates a profitable P&L from a full bank account.
Contractors lose cash in two places, invoices that go out late and invoices that never get chased. Collection rate catches both. A rate that drifts down month over month means work is turning into receivables faster than receivables are turning into cash, and the gap is being financed out of the owner's pocket.
How it is calculated
Collection rate = cash collected in the period divided by total amount invoiced in the period, expressed as a percentage. Track it on a rolling 30-day basis. The Level benchmark dataset puts the median contractor collection rate at 85.1%.
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