![]() Companies may have a 30-, 60-, or 90-day terms for payment from their customers. In general, a company with a higher accounts receivable turnover ratio is more efficient than a company with a lower AR turnover ratio. ![]() Why is measuring accounts receivable turnover important? Therefore, in this example, Company A collected its receivables on average 10.87 times that year. $64,000 in accounts receivables on January 1 (or the beginning of their fiscal year).Average accounts receivable is calculated by adding the number of accounts receivables at the beginning of the fiscal year and at the end of the fiscal year and then dividing the sum by two.įor example: Company A had the following financial results for the year: You can calculate it by dividing the net credit sales amount by the average accounts receivable amount. The accounts receivable turnover formula is simple. How to calculate accounts receivable turnover This metric can show an accounts receivable (AR) team how their AR processes are impacting their ability to close their outstanding receivables. The accounts receivable turnover formula is a metric for looking at how corporations are performing in receiving payments. ![]() This measurement can help identify potential AR roadblocks to your payments team. Your accounts receivable turnover is the ratio of the number of times your company collects your average accounts receivable balance. ![]()
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