We are independent & ad-supported. We may earn a commission for purchases made through our links.
Advertiser Disclosure
Our website is an independent, advertising-supported platform. We provide our content free of charge to our readers, and to keep it that way, we rely on revenue generated through advertisements and affiliate partnerships. This means that when you click on certain links on our site and make a purchase, we may earn a commission. Learn more.
How We Make Money
We sustain our operations through affiliate commissions and advertising. If you click on an affiliate link and make a purchase, we may receive a commission from the merchant at no additional cost to you. We also display advertisements on our website, which help generate revenue to support our work and keep our content free for readers. Our editorial team operates independently of our advertising and affiliate partnerships to ensure that our content remains unbiased and focused on providing you with the best information and recommendations based on thorough research and honest evaluations. To remain transparent, we’ve provided a list of our current affiliate partners here.

What is Accounts Receivable Turnover?

Malcolm Tatum
By
Updated May 17, 2024
Our promise to you
WiseGeek is dedicated to creating trustworthy, high-quality content that always prioritizes transparency, integrity, and inclusivity above all else. Our ensure that our content creation and review process includes rigorous fact-checking, evidence-based, and continual updates to ensure accuracy and reliability.

Our Promise to you

Founded in 2002, our company has been a trusted resource for readers seeking informative and engaging content. Our dedication to quality remains unwavering—and will never change. We follow a strict editorial policy, ensuring that our content is authored by highly qualified professionals and edited by subject matter experts. This guarantees that everything we publish is objective, accurate, and trustworthy.

Over the years, we've refined our approach to cover a wide range of topics, providing readers with reliable and practical advice to enhance their knowledge and skills. That's why millions of readers turn to us each year. Join us in celebrating the joy of learning, guided by standards you can trust.

Editorial Standards

At WiseGeek, we are committed to creating content that you can trust. Our editorial process is designed to ensure that every piece of content we publish is accurate, reliable, and informative.

Our team of experienced writers and editors follows a strict set of guidelines to ensure the highest quality content. We conduct thorough research, fact-check all information, and rely on credible sources to back up our claims. Our content is reviewed by subject-matter experts to ensure accuracy and clarity.

We believe in transparency and maintain editorial independence from our advertisers. Our team does not receive direct compensation from advertisers, allowing us to create unbiased content that prioritizes your interests.

As an important aspect of the Accounts Receivable process, monitoring the rate of Accounts Receivable Turnover is crucial to the financial health of any business. Essentially, Accounts Receivable Turnover is the average amount of time that it takes a given client or group of clients to pay outstanding invoices after they are generated and mailed to the customer. Having a firm understanding of this average duration is helpful to the company in several ways. Here are a few examples of how careful monitoring of Accounts Receivable Turnover can make a positive impact on the financial strength of a company.

Most businesses define the terms for payment to their customers. A good general standard is the expectation of payment within thirty days of the invoice date. However, it is not unusual for some companies to pay their vendors on a revolving schedule, sometimes only cutting checks for payment on specific days of the month. This can mean a vendor whose invoice does not arrive by the first day will have to wait for the second day later in the month to be cleared for payment and be issued a check.

By the time the process is complete and the payment is received, the Accounts Receivable Turnover average may be more along the lines of forty-five to sixty days. Understanding that your single largest customer is not likely to issue payment until sometime in that period makes it much easier to plan your own payment schedules to your vendors.

Periodic review of Accounts Receivable Turnover can also help to spot a customer that is experiencing some financial issues. If a review shows that a given client had an Accounts Receivable Turnover average of thirty-five days over a long duration, but the average has slipped to fifty-nine days over the last three to six months, that is reason to look into the situation further. While it may be something as simple as a new automated payment systems the customer is using, looking into the situation and determining if there are impending problems that could cost your company a lot of money is always a good idea.

The Accounts Receivable Turnover can also be used to demonstrate the financial strength of a company to prospective investors. While the actual monthly billed revenue is very important, investors will often want to see data on how quickly those customer payments are received. The Accounts Receivable Turnover report can easily show the average amount of time that passes before a payment is received from each client, as well as showing an overall average for the entire client base. While no one expects the turnover to match the exact terms of payment, many investors will consider it a big plus if the Accounts Receivable Turnover data indicates an overall average of less than a week from the stated terms of payment.

WiseGeek is dedicated to providing accurate and trustworthy information. We carefully select reputable sources and employ a rigorous fact-checking process to maintain the highest standards. To learn more about our commitment to accuracy, read our editorial process.
Malcolm Tatum
By Malcolm Tatum
Malcolm Tatum, a former teleconferencing industry professional, followed his passion for trivia, research, and writing to become a full-time freelance writer. He has contributed articles to a variety of print and online publications, including WiseGeek, and his work has also been featured in poetry collections, devotional anthologies, and newspapers. When not writing, Malcolm enjoys collecting vinyl records, following minor league baseball, and cycling.
Discussion Comments
By anon121990 — On Oct 26, 2010

Very very helpful indeed. Very straightforward and easily understood.

Malcolm Tatum
Malcolm Tatum
Malcolm Tatum, a former teleconferencing industry professional, followed his passion for trivia, research, and writing...
Learn more
WiseGeek, in your inbox

Our latest articles, guides, and more, delivered daily.

WiseGeek, in your inbox

Our latest articles, guides, and more, delivered daily.