RECEIVABLES TURNOVER HOW TO
RECEIVABLES TURNOVER PRO

Your balance sheet is where you obtain the accounts receivable balance for a particular date. In order to complete the next step, which is calculating your average accounts receivable balance, you will need to run a balance sheet. You will also want to subtract any adjustments such as returns.

RECEIVABLES TURNOVER PRO

Pro Tip: Be sure you only include credit sales in your calculation, since you are calculating your accounts receivable efficiency, you don’t want to include any cash sales. We will use $52,450 as our net credit sales total going forward. If you only sell on credit you won’t need to adjust your sales totals, but if you have cash sales as well, you will want to make an adjustment to your sales number before using it in your equation.įor instance, let’s use the following calculation to determine your net credit sales. Your income statement for the year will provide you with net sales for your business.

You can get this number from your income statement or profit and loss statement. Your first step to calculating your accounts receivable turnover is to obtain your net sales for the year.

RECEIVABLES TURNOVER HOW TO

How to calculate accounts receivable turnoverįollow along as we give you step-by-step instructions on how to calculate your accounts receivable turnover ratio. The accounts receivable turnover formula is easy to understand, even for small business owners without an accounting background, and all you’ll need is access to your financial statements to calculate your own ratio. Particularly useful when preparing financial projections, knowing your accounts receivable turnover ratio can give you greater insights into your business operations, allowing you to analyze and alter processes if necessary. Your staff bookkeeper or accountant or you can easily calculate your accounts receivable turnover using a simple formula which we will provide you along with tips on what the results mean. Calculating your accounts receivable turnover ratio helps you measure how effectively you manage your credit customers, and more importantly, how quickly you collect on their balances due. If you’re familiar with bookkeeping basics and double-entry accounting, you know that accounts receivable is part of the accounting cycle. Overview: What is accounts receivable turnover? Read on as we provide you with easy steps and a formula for calculating your accounts receivable turnover ratio. While it may sound complicated, calculating your accounts receivable turnover ratio is a lot easier than you may think. There are many accounting ratios that can be particularly helpful for your small business, but for those offering credit terms to their customers, none is as useful as the accounts receivable turnover ratio.

Receivables turnover