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

Our video covers:

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.

[opcomment]

Looked at several videos for help on this, and this was the best. Very clearly presented. Thanks!

[manudesouza]

Thank you for the video, i got one question how did i found all the componets to calculate net credit sales (cash sales, sales allowances...)?

[pammorrissey]

So helpful for my accounting exam, thank you!

[_Krazy]

Super helpful!!! Especially if you heard it once before, her explanations double check level of understanding

[ericdanieltrejo]

This was very helpful. I’ve seen a couple videos and found the way you explain terms very easy and simple.

[vkrgfan]

What if we don't know how much cash came from sales or other sources of income. Is there any other way to find Net Credit Sales?

[jasmineshanea.robles]

thanks for making this video! very helpful🥰❤️

[denzeljking]

By a lower ratio do you mean collecting invoices in less days? For example, a higher ratio is 100 days and low ratio is 10 days.

[waqasakram]

How to adjust advances in receivable for receivable turn over ratio

[ezanayo]

Example
ABC co account receivable balance has 100 birr at the end of the priod
After certain analysis at estimated that the total of birr 5000 will be uncollectable record this estimate in the journale as of December answer this questions please?

[chinmoyeegayen]

Where is number 2! How did you calculate the annual credit sales?

[HafeezBlackLeg]

bad presentation, didn't explain how to get the 100k net credit sales figure...