Accounts Receivable Turnover Calculator

Why A/R Turnover Matters

The Accounts Receivable Turnover Ratio measures how efficiently a company collects cash from customers who buy on credit. A high turnover indicates strong collections, while a low ratio may signal cash flow problems or credit risk.

How to Use This Calculator

Enter your annual net credit sales, beginning accounts receivable, and ending accounts receivable. The tool calculates:

• Turnover Ratio: How many times A/R is collected per year
• Average Collection Period: Average days to collect payment

The Formulas

Where:

• Net Credit Sales: Sales on credit, net of returns
• Average A/R: Mean receivables over the period
• 365: Days in a year (use 360 for some industries)

Real-World Applications

• Cash Flow Management: Predict incoming cash
• Credit Policy: Evaluate if terms are too lenient
• Performance Benchmarking: Compare to industry averages
• Investor Reporting: Show operational efficiency

What's a Good Ratio?

Example

A company with $500,000 in credit sales and average receivables of $60,000 has a turnover of 8.33x. This means it collects its receivables 8.3 times per year, or every 44 days on average.

Improving A/R Turnover

• ✅ Send invoices promptly after delivery
• ✅ Offer early payment discounts (e.g., 2/10 net 30)
• ✅ Follow up on overdue accounts systematically
• ✅ Tighten credit approval for new customers
• ✅ Use automated billing and reminder systems
• ✅ Require deposits for large orders