Formula
Accounts Receivable Turnover = Net Credit Sales ÷ Average Accounts Receivable
Calculation Example
If a company has $800,000 in credit sales and an average accounts receivable of $160,000, AR Turnover = 800,000 ÷ 160,000 = 5 times
Data Source
Financial statements, accounting reports
Tracking Frequency
Quarterly, Annually
Optimal Value
Higher is better; indicates efficient credit collection.
Minimum Acceptable Value
Very low turnover suggests poor credit management and late payments.
Benchmark
Industry average ~5-12 times, varies by payment terms
Recommended Chart Type
Bar chart (to compare customer payment efficiency), Line chart (to track trends)
How It Appears in Reports
Displayed in financial reports to assess credit management.
Why Is This KPI Important?
Shows how well a company collects receivables and maintains cash flow.
Typical Problems and Limitations
High turnover may indicate overly strict credit policies, reducing sales.
Actions for Poor Results
Improve invoicing processes, offer payment incentives, reduce credit risk.
Related KPIs
Working Capital, Accounts Payable Turnover, Cash Flow
Real-Life Examples
A SaaS company improved AR turnover by automating invoicing, reducing late payments by 30%.
Most Common Mistakes
Extending too much credit, failing to follow up on overdue accounts.
