Accounts Receivable Turnover Calculator
The accounts receivable turnover ratio shows how many times a business collects its average receivables balance in a year. Higher is better: it means invoices turn into cash more often.
- AR turnover ratio
- 8
- Average collection period
- 45.6 days
How it works
AR Turnover = Net Credit Sales / Average Accounts Receivable
Divide net credit sales for the year by average accounts receivable (opening AR plus closing AR, divided by two). The result is how many times per year you collect your book of receivables.
The calculator also converts the ratio into an average collection period in days (365 divided by the turnover ratio), which is easier to explain to clients.
Worked example
A business with $800,000 in net credit sales and average receivables of $100,000 turns its receivables 8 times a year. That works out to an average collection period of about 46 days.
A receivables turnover ratio of 8 or higher, equivalent to collecting in about 45 days or less, is generally considered healthy for services businesses.
Frequently asked questions
- What does a low AR turnover ratio mean?
- Cash is stuck in unpaid invoices. Either credit terms are too loose, collections are too slow, or some receivables should be written off.
- How is AR turnover different from DSO?
- They measure the same thing from different angles. Turnover counts collections per year; DSO expresses the same speed as days to collect. DSO = 365 / turnover.
- Should I use gross or net credit sales?
- Net. Subtract returns and allowances first, since those sales never turn into collectible receivables.
AR automation tools for faster collections
Compare vendor-neutral rankings of ap, ar, and payments tools for accounting firms, matched on published specs.
Browse AP, AR, and payments tools