The formula for AR turnover ratio looks like this:
It tells you the number of times during a given period (for instance, a month, quarter, or year) the company collected the average value of its receivables.Ī higher number is preferable for AR turnover, as it indicates that your company is collecting on outstanding invoices quickly (the company collected on its average receivables more times in a given period). KPI 1: AR turnover ratio What is AR turnover ratio?Īccounts receivable turnover ratio is a measure of how good your company is at collecting from its customers. In this blog, we’ll cover the 11 most important accounts receivable KPIs to track.
Having this data readily available will help you identify the strengths and weaknesses within your AR processes so you can make informed decisions that drive your business forward. That’s why it’s beneficial to actively track several AR KPIs.
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No single key performance indicator (KPI) or metric will tell you the full story of how your collections efforts are performing. To do this, you need access to the right data and analytics-and more importantly, you need to know what to do with it. To maximize accounts receivable performance, it’s essential that your AR team has a clear view into how the business is tracking on its collections and where there’s room for improvement. If cash is the fuel of your business, then your accounts receivable (AR) team are the ones stoking the flames.
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