Calculate how efficiently you collect receivables. Your AR turnover ratio shows how many times per period you convert outstanding invoices into cash. The higher, the better.
Measure how efficiently you collect receivables
The AR turnover ratio tells you how many times per period you collect your average receivables balance. It's one of the most important metrics for cash flow health.
The AR turnover formula:
AR Turnover = Net Credit Sales / Average Accounts Receivable
Where Average AR = (Beginning AR + Ending AR) / 2
> 10x
Excellent
You're collecting receivables very efficiently.
4–10x
Average
Typical range. Automated reminders can push this higher.
< 4x
Needs attention
Collection process needs improvement. Cash flow at risk.
Your AR turnover ratio is directly related to DSO. Use our DSO calculator for that metric. For a complete approach to improving collections, read our AR automation guide.
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