# Overdue Receivables Ratio

> The overdue receivables ratio is the percentage of receivables past due, calculated as overdue AR divided by total AR.

Source: https://www.paidnice.com/dictionary/overdue-receivables-ratio
Publisher: Paidnice
Part of: Accounts Receivable Dictionary, https://www.paidnice.com/dictionary

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## What is the overdue receivables ratio?

**The overdue receivables ratio is the percentage of your accounts receivable that is past its due date. You calculate it by dividing overdue receivables by total receivables, then multiplying by 100.** It is a quick read on collection health: a low ratio means most customers pay on time, while a high or rising ratio signals collection problems or terms that are too loose.

It pairs well with days sales outstanding. DSO tells you how long collection takes on average; the overdue receivables ratio tells you how much of the ledger is already late right now.

### Key takeaways

- **Overdue AR divided by total AR.** The share of your ledger that is already past due, as a percentage.
- **Lower is healthier.** A rising ratio is an early sign collections are slipping.
- **Use it with DSO.** DSO is collection speed; this ratio is how much is late right now.

## How to calculate the overdue receivables ratio

Divide the value of invoices past their due date by your total outstanding receivables, then multiply by 100.

```
Overdue receivables ratio = (Overdue receivables / Total receivables) x 100
```

Worked example: $25,000 overdue against $100,000 total receivables gives a ratio of 25%.

An interactive calculator for this is on the page.

## What percentage of receivables should be overdue?

**As a rough benchmark, a healthy business keeps overdue receivables under about 15 to 25% of total receivables, and the older buckets (90 days plus) very small.** There is no universal target: it varies by industry, customer mix and payment terms. What matters most is the trend and the aging profile. A ratio drifting upward, or a growing share sitting in the 60 and 90 day buckets, is the signal to tighten collections. An [aging analysis](https://www.paidnice.com/dictionary/aging-analysis) shows where the overdue balance is concentrated, and [days delinquent sales outstanding](https://www.paidnice.com/dictionary/days-delinquent-sales-outstanding) isolates just the late portion.

## Frequently asked questions

**How do you calculate the overdue receivables ratio?**
Divide the value of invoices past their due date by total outstanding receivables, then multiply by 100. For example, 25,000 overdue out of 100,000 total receivables is an overdue receivables ratio of 25%.

**What percentage of accounts receivable should be overdue?**
As a rough benchmark, keep overdue receivables under about 15 to 25% of total receivables, with very little in the 90 day plus buckets. The right level depends on your industry and terms, so watch the trend rather than a single number.

**What does a high overdue receivables ratio mean?**
A high or rising ratio means a large share of your ledger is past due. It points to collection problems, credit terms that are too loose, or customers in difficulty, and it usually leads to slower cash flow and higher bad debt risk.

**How is the overdue receivables ratio different from DSO?**
Days sales outstanding measures the average time it takes to collect receivables. The overdue receivables ratio measures how much of the current ledger is already past due. DSO is about speed; the overdue ratio is about how much is late right now.

## Related

- [AR aging analysis calculator](https://www.paidnice.com/calculators/accounts-receivable-aging-analysis): see where the overdue balance is concentrated.
- [Aging analysis](https://www.paidnice.com/dictionary/aging-analysis): break receivables into 30/60/90 day buckets.
- [AR insights and reporting](https://www.paidnice.com/accounts-receivable-reporting): track the overdue ratio in real time.