Learn how to calculate accounts receivable turnover and measure how efficiently you collect payments from customers.
Accounts receivable turnover measures how many times per year you collect your average accounts receivable balance. Formula: AR Turnover = Net Credit Sales ÷ Average Accounts Receivable. A higher ratio means faster collections and better cash flow. A ratio of 10 means you collect receivables 10 times per year (every 36 days). Higher is better—it indicates efficient collections and healthy cash flow. Low ratios suggest slow-paying customers or collection problems.
AR Turnover = Net Credit Sales ÷ Average Accounts Receivable
Learn about receivable turnover ratio and use our cash flow calculator.
Business: B2B services company
• Net Credit Sales (annual): $500,000
• Beginning AR: $40,000
• Ending AR: $60,000
Average AR: ($40,000 + $60,000) ÷ 2 = $50,000
AR Turnover = $500,000 ÷ $50,000 = 10
✓ Good turnover - Collects receivables 10 times per year (every 36 days)
Very efficient collections. Collecting receivables monthly or faster. Strong cash flow management.
Efficient collections. Collecting receivables every 30-45 days. Healthy cash flow.
Moderate collections. Collecting receivables every 45-90 days. May need to improve collection processes.
Slow collections. Taking 90+ days to collect. Cash flow problems likely. Need immediate collection improvements or invoice financing.
You can also express AR turnover as days sales outstanding:
DSO = 365 ÷ AR Turnover
Example: AR Turnover of 10 = DSO of 36.5 days (takes 36.5 days on average to collect payment).
Lower DSO is better—it means faster collections and better cash flow.
Send invoices immediately after completing work or delivering products. Faster invoicing means faster payment.
Offer 2% discount for payment within 10 days (2/10 net 30). Many customers will pay early to save money.
Send reminders at 30, 45, and 60 days. Call customers before accounts become seriously overdue.
Get cash immediately for unpaid invoices instead of waiting. Learn about invoice financing and invoice factoring.
Check credit before extending terms. Avoid customers with poor payment history.
It depends on your industry and payment terms. Generally, 8-12 is considered good (collecting every 30-45 days). Higher is better. If you offer net 30 terms, a ratio of 12 means you're collecting on time. Lower ratios indicate slow collections.
Higher turnover means faster collections and better cash flow. Low turnover means cash is tied up in receivables, creating cash flow gaps. Use our cash flow calculator to track your cash flow.
Very high turnover (20+) might indicate overly strict credit terms that could limit sales. However, high turnover is generally positive and shows efficient collections.
For new businesses without historical data, use current receivables balance as average. Once you have 12+ months of data, use the beginning and ending balance method.
Alternative calculation method for receivables turnover.
Get cash immediately for unpaid invoices to improve cash flow.
Track your cash flow and receivables impact.
Understand how receivables affect working capital.
Our team can help you find financing solutions to bridge cash flow gaps from slow receivables.
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