AR days outstanding (sometimes written A/R days) is a measure of how long, on average, it takes a business to turn its receivables into cash. Healthcare businesses use the term often; in other sectors the same idea usually goes by days sales outstanding (DSO).
How it works in factoring
A common formula divides the receivables balance by average daily revenue:
AR days = accounts receivable / (revenue for the period / days in the period)
Illustrative example: A clinic has $180,000 in receivables and billed $540,000 over the last 90 days. Average daily revenue is $6,000, so AR days are 30.
Factors look at this number because it predicts how long their money will be out on each invoice. Longer collection times mean higher time-based fees and more exposure. Factors also look past the average, because a single slow-paying customer or payer can be hidden inside a reasonable overall figure.
In medical billing, AR days are often broken down by payer, such as commercial insurers versus government programs, since each pays on its own timeline.
Why it matters
- It shows whether receivables are turning over quickly or piling up
- A rising figure can signal billing errors, denied claims or customer distress
- It helps estimate what factoring would actually cost, since many fees grow with time
What to check
Calculate the figure consistently over the same period length, compare it to your stated payment terms, and look at the trend over several months rather than a single snapshot.