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How to Calculate Your Accounts Receivable Turnover Ratio: Formula and Examples

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How to Calculate Your Accounts Receivable Turnover Ratio: Formula and Examples

73,379 views November 25, 2019 6:13

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We show you how to calculate and improve your accounts receivable turnover ratio. Understanding the accounts receivable turnover ratio formula can help you determine how effective you are at extending credit and collecting debts from your customers. In this video, we break down accounts receivable turnover ratio so you can use it to gain valuable insight into your business operations. For our complete guide, visit: bit.ly/2Oqag40.

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Accounts receivable turnover ratio formula (1:02)

The formula for accounts receivable turnover ratio is net credit sales divided by average accounts receivable. You can find these numbers on your business’s balance sheet.

Accounts receivable turnover ratio example (1:54)

What makes a good accounts receivable turnover ratio (3:41)

In general, a high accounts receivable turnover ratio is better than a low ratio. A low ratio can indicate that your credit collection policies aren’t strict enough. However, if your ratio is too high, you might be turning customers away with too-strict credit collection policies. It’s good to find a balance.

How to improve your accounts receivable turnover ratio (4:38)

The best way to improve your accounts receivable turnover ratio is to collect on invoices more quickly and efficiently. Some strategies to do this are sending out the invoice more quickly, offering early payment discounts, and enforcing late payment fees.

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About this tutorial

Fundera published this 6:13 video tutorial on November 25, 2019. It has been watched 73,379 times on YouTube.

Channel: Fundera
Category: Education
Duration: 6:13
Published: November 25, 2019
Views: 73,379
Likes: 602

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Further reading

Accounts Receivable Turnover Ratio - Formula, Examples corporatefinanceinstitute.com
The accounts receivable turnover ratio, also known as the debtor’s turnover ratio, is an efficiency ratio Financial Ratios Financial ratios are created with the use of numerical values taken from financial statements to…
Accounts Receivable Turnover Calculator and Formula | DiscoverCI discoverci.com
How the accounts receivable turnover ratio is calculated, What the A/R turnover ratio measures, and; An example to further enhance your understanding of the ratio. By the end of this article you'll have everything you n…
Accounts Receivable Turnover Ratio and Formula - Dun & Bradstreet dnb.com
To calculate their accounts receivable turnover ratio, they divide net credit sales ($500,000) by the average accounts receivable ($125,000) and end up with the number four. Company “B” also has $500,000 in net credit s…
Accounts Receivable Turnover Ratio: Formula & How to Calculate fundera.com
Accounts Receivable Turnover Ratio Formula. The accounts receivable turnover ratio formula is simple: Net credit sales / Average Accounts Receivable. You can learn how to calculate accounts receivable turnover ratio, th…
Accounts Receivable Turnover Ratio | Formula | Analysis | Example myaccountingcourse.com
Formula. Accounts receivable turnover is calculated by dividing net credit sales by the average accounts receivable for that period. The reason net credit sales are used instead of net sales is that cash sales don’t cre…

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