Learn how to calculate receivable turnover ratio and measure how efficiently you collect payments from customers.
The receivable turnover ratio (also called accounts receivable turnover) measures how many times per year you collect your average receivables balance. Formula: Receivable Turnover = Net Credit Sales ÷ Average Accounts Receivable. A ratio of 10 means you collect receivables 10 times per year (every 36 days). Higher ratios indicate faster collections and better cash flow. Low ratios suggest slow-paying customers or collection problems that may require invoice financing.
Receivable Turnover = Net Credit Sales ÷ Average Accounts Receivable
This is the same as accounts receivable turnover. Learn more about accounts receivable turnover for detailed explanation.
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. Consider invoice financing to improve cash flow.
Send invoices immediately after completing work. Faster invoicing means faster payment.
Offer discounts for early payment (e.g., 2/10 net 30) to encourage faster collections.
Send reminders and call customers before accounts become seriously overdue.
Get cash immediately for unpaid invoices. Learn about invoice financing and commercial lending options.
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.
Higher turnover means faster collections and better cash flow. Low turnover means cash is tied up in receivables. Use our cash flow calculator to track impact.
Detailed guide to AR turnover calculation and examples.
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