DEFINITION of 'Average Collected Balance'

The average balance of collected funds (less any uncleared or uncollected deposits) in a bank account over a specified period, usually one month. The average collected balance is calculated by adding the daily collected balance and dividing by the number of days in the period.

BREAKING DOWN 'Average Collected Balance'

The average collected balance is used to determine the amount of interest to be paid on a monthly balance, since uncollected funds do not earn interest. For most individuals, the difference between the average daily balance and average collected balance will be small, but for businesses it may be very large.

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RELATED FAQS
  1. Why is Average Collection Period important to a company?

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  2. In which industries is Average Collection Period most important?

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  3. How can a creditor improve its Average Collection Period?

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