{"id":23194,"date":"2021-01-01T10:30:42","date_gmt":"2021-01-01T05:00:42","guid":{"rendered":"https:\/\/corpbiz.io\/learning\/?p=23194"},"modified":"2025-03-03T17:53:16","modified_gmt":"2025-03-03T12:23:16","slug":"simple-techniques-to-improve-the-accounts-receivable-turnover","status":"publish","type":"post","link":"https:\/\/corpbiz.io\/learning\/simple-techniques-to-improve-the-accounts-receivable-turnover\/","title":{"rendered":"Simple Techniques to Improve the Accounts Receivable Turnover"},"content":{"rendered":"\n<p class=\"has-drop-cap\">Apart from tracking the balance sheet what else a small business owner can do to track the financial well-being of their company? The answer is accounts receivable turnover. If you have recently stepped in into the business arena then probably you might not be aware of this particular term. <a href=\"https:\/\/corpbiz.io\/accounts-receivable-services\" title=\"Accounts Receivable Services\"><strong>Accounts receivable<\/strong><\/a> turnover reflects the company\u2019s financial status and determines whether it is handling the cash flow efficiently or not.<\/p>\n\n\n\n<p>Truth be told, accounts receivable turnover exhibits the\ncompany\u2019s ability to convert its account receivables into cash. To ensure\nlong-term business success, accounts receivable turnover is something that you\ncan\u2019t neglect at any cost.<\/p>\n\n\n\n<div id=\"ez-toc-container\" class=\"ez-toc-v2_0_82_2 counter-hierarchy ez-toc-counter ez-toc-grey ez-toc-container-direction\">\n<div class=\"ez-toc-title-container\">\n<p class=\"ez-toc-title ez-toc-toggle\" style=\"cursor:pointer\">Page Contents<\/p>\n<span class=\"ez-toc-title-toggle\"><a href=\"#\" class=\"ez-toc-pull-right ez-toc-btn ez-toc-btn-xs ez-toc-btn-default ez-toc-toggle\" aria-label=\"Toggle Table of Content\"><span class=\"ez-toc-js-icon-con\"><span class=\"\"><span class=\"eztoc-hide\" style=\"display:none;\">Toggle<\/span><span class=\"ez-toc-icon-toggle-span\"><svg style=\"fill: #999;color:#999\" xmlns=\"http:\/\/www.w3.org\/2000\/svg\" class=\"list-377408\" width=\"20px\" height=\"20px\" viewBox=\"0 0 24 24\" fill=\"none\"><path d=\"M6 6H4v2h2V6zm14 0H8v2h12V6zM4 11h2v2H4v-2zm16 0H8v2h12v-2zM4 16h2v2H4v-2zm16 0H8v2h12v-2z\" fill=\"currentColor\"><\/path><\/svg><svg style=\"fill: #999;color:#999\" class=\"arrow-unsorted-368013\" xmlns=\"http:\/\/www.w3.org\/2000\/svg\" width=\"10px\" height=\"10px\" viewBox=\"0 0 24 24\" version=\"1.2\" baseProfile=\"tiny\"><path d=\"M18.2 9.3l-6.2-6.3-6.2 6.3c-.2.2-.3.4-.3.7s.1.5.3.7c.2.2.4.3.7.3h11c.3 0 .5-.1.7-.3.2-.2.3-.5.3-.7s-.1-.5-.3-.7zM5.8 14.7l6.2 6.3 6.2-6.3c.2-.2.3-.5.3-.7s-.1-.5-.3-.7c-.2-.2-.4-.3-.7-.3h-11c-.3 0-.5.1-.7.3-.2.2-.3.5-.3.7s.1.5.3.7z\"\/><\/svg><\/span><\/span><\/span><\/a><\/span><\/div>\n<nav><ul class='ez-toc-list ez-toc-list-level-1 eztoc-toggle-hide-by-default' ><li class='ez-toc-page-1 ez-toc-heading-level-2'><a class=\"ez-toc-link ez-toc-heading-1\" href=\"https:\/\/corpbiz.io\/learning\/simple-techniques-to-improve-the-accounts-receivable-turnover\/#What_is_Accounts_Receivable_Turnover\" >What is Accounts Receivable\nTurnover?<\/a><\/li><li class='ez-toc-page-1 ez-toc-heading-level-2'><a class=\"ez-toc-link ez-toc-heading-2\" href=\"https:\/\/corpbiz.io\/learning\/simple-techniques-to-improve-the-accounts-receivable-turnover\/#Why_Account_Receivable_Turnover_is_Crucial_in_the_Contemporary_Period_from_the_Companys_Perspective\" >Why Account Receivable Turnover is\nCrucial in the Contemporary Period from the Company\u2019s Perspective?<\/a><\/li><li class='ez-toc-page-1 ez-toc-heading-level-2'><a class=\"ez-toc-link ez-toc-heading-3\" href=\"https:\/\/corpbiz.io\/learning\/simple-techniques-to-improve-the-accounts-receivable-turnover\/#Tips_to_Improve_Accounts_Receivable_Turnover\" >Tips to Improve Accounts\nReceivable Turnover<\/a><\/li><li class='ez-toc-page-1 ez-toc-heading-level-2'><a class=\"ez-toc-link ez-toc-heading-4\" href=\"https:\/\/corpbiz.io\/learning\/simple-techniques-to-improve-the-accounts-receivable-turnover\/#Conclusion\" >Conclusion<\/a><\/li><\/ul><\/nav><\/div>\n<h2 class=\"wp-block-heading\"><span class=\"ez-toc-section\" id=\"What_is_Accounts_Receivable_Turnover\"><\/span>What is Accounts Receivable\nTurnover?<span class=\"ez-toc-section-end\"><\/span><\/h2>\n\n\n\n<p>Accounts receivable turnover measures the ability of a company to maintain a healthy cash flow by recovering the outstanding amount from the client against the services provided. You can determine how efficiently your business is handling the credit arrangement and cash collection via Accounts receivable turnover.<\/p>\n\n\n\n<div class=\"shadow1\">Accounts Receivable Turnover = Net Credit Sales\/Average Accounts Receivable <\/div>\n\n\n\n<p>In the above mathematic expression, Net credit sales is equivalent to the gross credit sales for a specific timeline, be it monthly, quarterly, or yearly, minus any customer refunds.&nbsp;The Average Accounts Receivable can be calculated by simply adding the beginning accounts and ending accounts receivable for the specific timeline and dividing the whole expression by two. Make sure to consider the same timeline for calculating the average Accounts Receivable and net credit sales.&nbsp;<\/p>\n\n\n\n<p class=\"text-left\"><b>Read our article<\/b>:<mark style=\"background: #fffd03 !important;\"><a href=\"https:\/\/corpbiz.io\/learning\/resolve-typical-issues-of-medical-accounts-receivable\/\">How to Resolve Typical Issues of Medical Accounts Receivable?<\/a><\/mark><\/p>\n\n\n\n<h2 class=\"wp-block-heading\"><span class=\"ez-toc-section\" id=\"Why_Account_Receivable_Turnover_is_Crucial_in_the_Contemporary_Period_from_the_Companys_Perspective\"><\/span>Why Account Receivable Turnover is\nCrucial in the Contemporary Period from the Company\u2019s Perspective?<span class=\"ez-toc-section-end\"><\/span><\/h2>\n\n\n\n<p>In general, the accounts receivable turnover ratio is directly proportional to business profitability. The higher ratio indicates that the company is in a profitable state and handling the expenses with authenticity. The lower ratio, on the contrary, indicates the company\u2019s inability to deploy optimal credit control policies. Besides, it also shows that the company is lacking a reliable client base.&nbsp;Probing in the account receivable process and credit terms is essential for safeguarding the well-being of the company.&nbsp; <\/p>\n\n\n\n<h2 class=\"wp-block-heading\"><span class=\"ez-toc-section\" id=\"Tips_to_Improve_Accounts_Receivable_Turnover\"><\/span>Tips to Improve Accounts\nReceivable Turnover<span class=\"ez-toc-section-end\"><\/span><\/h2>\n\n\n<div class=\"wp-block-image\">\n<figure class=\"aligncenter is-resized\"><img decoding=\"async\" src=\"https:\/\/corpbiz.io\/learning\/wp-content\/uploads\/2020\/12\/Tips-to-Improve-Accounts-Receivable-Turnover.png\" alt=\"Improve Accounts Receivable Turnover\" class=\"wp-image-23250\" width=\"527\" height=\"510\" srcset=\"https:\/\/corpbiz.io\/learning\/wp-content\/uploads\/2020\/12\/Tips-to-Improve-Accounts-Receivable-Turnover.png 985w, https:\/\/corpbiz.io\/learning\/wp-content\/uploads\/2020\/12\/Tips-to-Improve-Accounts-Receivable-Turnover-300x290.png 300w, https:\/\/corpbiz.io\/learning\/wp-content\/uploads\/2020\/12\/Tips-to-Improve-Accounts-Receivable-Turnover-768x743.png 768w\" sizes=\"(max-width: 527px) 100vw, 527px\" \/><\/figure><\/div>\n\n\n<p>In view of this, here are some cutting-edge approaches that you\ncan adopt to improve the accounts receivable turnover of your company<\/p>\n\n\n\n<h3 class=\"wp-block-heading\">Build Healthy Client\nRelationships<\/h3>\n\n\n\n<p>The very first thing that can do to improve the account\nreceivable is to build healthy relationships with the existing client. If you\nmanage to keep them happy, then you may not encounter an unexpected delay in\nthe payments and your cash flow remains unaffected for a longer duration of\ntime. Small gestures like email check-in and a friendly phone call would be\nenough to make a difference when it comes to recovering debts.&nbsp;<\/p>\n\n\n\n<h3 class=\"wp-block-heading\">Accurate and Timely\nInvoice&nbsp;<\/h3>\n\n\n\n<p>Accurate and timely invoice is another way to improve the cash flow in the company. Companies who exempt clients to pay early on-time payment will suffer in the longer run. Therefore, it becomes important for your company to roll out invoices as soon as the client availed of the services.&nbsp;The late issuance of invoices can allow your clients to skip the payable amount. So be wise and cautious while&nbsp;invoicing your customer<em>. <\/em>Don\u2019t forget that customers are more reluctant to pay the quarterly or annual invoice in comparison to the regular bill.<em>&nbsp;<\/em><\/p>\n\n\n\n<h3 class=\"wp-block-heading\">Incorporate Revised\nPayment Terms&nbsp;<\/h3>\n\n\n\n<p>Make sure layout clear cut policies for debt recovery against\nthe services provided. The policy must encompass the provision for late payment\nand charges against the same. Don\u2019t hesitate to set up a credit limit in case\nif you are dealing with high-value services.&nbsp;<\/p>\n\n\n\n<h3 class=\"wp-block-heading\">Use Cloud-Based Software<\/h3>\n\n\n\n<p>Cloud-based accounting software primarily targets the time-consuming aspect of the billing and accounts receivable process. They can help you speed up the billing process with assured accuracy. Accessing the cloud software lets you coordinate with the <a href=\"https:\/\/corpbiz.io\/bookkeeping-services\" title=\"Benefits of Bookkeeping Services\"><strong>bookkeeping<\/strong><\/a> team in real-time and access financial data on a 24&#215;7 basis.&nbsp;<\/p>\n\n\n\n<h3 class=\"wp-block-heading\">Deploying New Payment\nModes&nbsp;<\/h3>\n\n\n\n<p>Obsolete payment methods act as an obstacle to the account\nreceivable process. Implementing new payment modes will motivate the client to\naddress the payment liability on time. If possible, try replacing old payment\nmodes like wire transfer or cheque with the new mode such as credit card and\nelectronic funds transfers.&nbsp;<\/p>\n\n\n\n<h3 class=\"wp-block-heading\">Deploy Pre-Payment\nPolicies, If Possible&nbsp;<\/h3>\n\n\n\n<p>This may be the best technique for managing accounts receivable,\nbut it can\u2019t apply to a larger landscape. Pre-payment policies were used by a\nwell-established organization or other entities that are dealing with\nhigh-valued products or have a strong brand presence in the market. For the new\ncompanies, it may not be a viable option.&nbsp;<\/p>\n\n\n\n<h3 class=\"wp-block-heading\">Simplify the Billing\nStructure<\/h3>\n\n\n\n<p>Many service-based organizations have overcome issues with their\naccount receivables by implementing the policy of fixed-fee billing. When you\nenter into a service contract with your client, you basically render the\nmonthly services at a fixed price. And that can translate into the reduction of\npanic that often rises when a client confronts a higher invoice than expected.<\/p>\n\n\n\n<p>A fixed fee billing policy can motivate clients to opt for\nautomatic payment instead of the conventional payment method like cheque or\nwire transfer. Consequently, fixed-fee billing strikes balance between\nrendering your client with billing clarity and ensuring you reap uninterrupted\npayment on time.&nbsp;<\/p>\n\n\n\n<h3 class=\"wp-block-heading\">Follow Up Regularly<\/h3>\n\n\n\n<p>No company likes to adopt a stringent approach when it comes to\nintimating clients for payment. There are some subtle ways to do the same. You\ncan calibrate your collection process by incorporating transparent policies in\nregards to invoice generation and payment terms.&nbsp;<\/p>\n\n\n\n<h3 class=\"wp-block-heading\">Reconcile Frequently<\/h3>\n\n\n\n<p>Consistent reconciliation with accounting records will let you\nkeep your account receivables up to date. By constantly managing, monitoring,\nand improving accounts receivable turnover you can ensureseamless flow of cash\nwithin the company. <\/p>\n\n\n\n<h2 class=\"wp-block-heading\"><span class=\"ez-toc-section\" id=\"Conclusion\"><\/span>Conclusion<span class=\"ez-toc-section-end\"><\/span><\/h2>\n\n\n\n<p>From incorporating cloud based software to improving the <em><strong>billing<\/strong><\/em><sup><a href=\"https:\/\/en.wikipedia.org\/wiki\/Billing\"><em><strong>[1]<\/strong><\/em><\/a><\/sup> and credit-based policies, there are number strategies that one can applied to improve the Accountable receivables of the company. But, first, you need pinpoint the areas that are accountable for the poor cash flow for the company. <\/p>\n\n\n\n<p>Once you identified the affected area, the rest would be fixed with ease if you already have solution for that. The solution mentioned above are applicable to every vertical of the business that have a long list of customers. Drop your queries in the comment section if you seek additional detail on the same. <\/p>\n\n\n\n<p class=\"text-left\"><b>Read our article<\/b>:<mark style=\"background: #fffd03 !important;\"><a href=\"https:\/\/corpbiz.io\/learning\/tips-to-manage-accounts-receivable\/\">Accounts Receivable: Definition and Tips to Manage<\/a><\/mark><\/p>\n","protected":false},"excerpt":{"rendered":"<p>Apart from tracking the balance sheet what else a small business owner can do to track the financial well-being of their company? The answer is accounts receivable turnover. If you have recently stepped in into the business arena then probably you might not be aware of this particular term. Accounts receivable turnover reflects the company\u2019s [&hellip;]<\/p>\n","protected":false},"author":22,"featured_media":23248,"comment_status":"open","ping_status":"closed","sticky":false,"template":"","format":"standard","meta":[],"categories":[128],"tags":[1379],"acf":{"service_id":"297"},"authorName":"Pankaj Tyagi","authorImageUrl":"https:\/\/corpbiz.io\/learning\/wp-content\/uploads\/2022\/01\/MicrosoftTeams-image-42.jpg","authorDescription":"Pankaj has a diverse experience of writing research papers, blog, and articles during his college time. Earlier, he was working as a tax consultant in a financial firm, but his interest in writing drives him to pursue a career in the writing field.","postViews":5250,"readingTime":4,"_links":{"self":[{"href":"https:\/\/corpbiz.io\/learning\/wp-json\/wp\/v2\/posts\/23194"}],"collection":[{"href":"https:\/\/corpbiz.io\/learning\/wp-json\/wp\/v2\/posts"}],"about":[{"href":"https:\/\/corpbiz.io\/learning\/wp-json\/wp\/v2\/types\/post"}],"author":[{"embeddable":true,"href":"https:\/\/corpbiz.io\/learning\/wp-json\/wp\/v2\/users\/22"}],"replies":[{"embeddable":true,"href":"https:\/\/corpbiz.io\/learning\/wp-json\/wp\/v2\/comments?post=23194"}],"version-history":[{"count":10,"href":"https:\/\/corpbiz.io\/learning\/wp-json\/wp\/v2\/posts\/23194\/revisions"}],"predecessor-version":[{"id":68983,"href":"https:\/\/corpbiz.io\/learning\/wp-json\/wp\/v2\/posts\/23194\/revisions\/68983"}],"wp:featuredmedia":[{"embeddable":true,"href":"https:\/\/corpbiz.io\/learning\/wp-json\/wp\/v2\/media\/23248"}],"wp:attachment":[{"href":"https:\/\/corpbiz.io\/learning\/wp-json\/wp\/v2\/media?parent=23194"}],"wp:term":[{"taxonomy":"category","embeddable":true,"href":"https:\/\/corpbiz.io\/learning\/wp-json\/wp\/v2\/categories?post=23194"},{"taxonomy":"post_tag","embeddable":true,"href":"https:\/\/corpbiz.io\/learning\/wp-json\/wp\/v2\/tags?post=23194"}],"curies":[{"name":"wp","href":"https:\/\/api.w.org\/{rel}","templated":true}]}}