Receivables Turnover Calculator
Calculate accounts receivable turnover ratio to measure collection efficiency and credit management
Calculate Receivables Turnover
Revenue from goods or services sold on credit
Outstanding receivables at period start
Outstanding receivables at period end
Please enter net credit sales and at least one accounts receivable balance to calculate turnover ratio.
Example: Calculator Enterprises Inc.
Scenario
Company: Calculator Enterprises Inc.
Net credit sales: $15,000
A/R opening balance: $2,000
A/R closing balance: $3,000
Calculation
Average A/R = ($2,000 + $3,000) ÷ 2 = $2,500
Turnover Ratio = $15,000 ÷ $2,500 = 6.0
Days Sales Outstanding = 365 ÷ 6.0 = 61 days
Collection Efficiency: Good (ratio of 6.0)
Turnover Ratio Benchmarks
Collection Improvement Tips
Tighten credit terms: Reduce payment periods and improve screening
Follow up promptly: Send reminders before and after due dates
Offer incentives: Early payment discounts for quick settlement
Automate processes: Use software for invoicing and collections
Understanding Receivables Turnover
What is Receivables Turnover?
The receivables turnover ratio measures how efficiently a company collects its accounts receivable. It shows how many times a company converts its receivables into cash during a specific period, indicating the effectiveness of credit and collection policies.
Why Monitor This Ratio?
- •Assess collection efficiency and credit management
- •Identify cash flow improvement opportunities
- •Compare performance against industry benchmarks
- •Evaluate credit policy effectiveness
Calculation Formula
Receivables Turnover = Net Credit Sales ÷ Average A/R
Average A/R = (Opening + Closing) ÷ 2
Days Sales Outstanding = Days in Period ÷ Turnover Ratio
Interpretation Guidelines
- High Ratio: Efficient collection, good cash flow
- Low Ratio: Collection problems, cash flow issues
- Industry Comparison: Compare with sector averages
- Trend Analysis: Monitor changes over time
Tip: Balance collection efficiency with customer relationships and sales growth.