The accounts receivable turnover, sometimes referred to as the receivables turnover ratio, is an activity ratio and measures the number of times the accounts receivable was collected during an accounting period or looked at another way, the number of times the accounts receivable was converted into cash.
The value of the accounts receivable turnover will depend on the industry the business operates in.
A low accounts receivable turnover can indicate inefficiency in collecting accounts receivable from customers, leading to bad debt write offs for the business.
The ratio calculation is carried out using the accounts receivable turnover formula by dividing the net credit sales by the average accounts receivable for the period.
Net credit sales is found on the income statement and is used to eliminate cash sales which do not create accounts receivable.
Accounts receivable is found on the balance sheet of the business. The average of the opening and closing accounts receivable balances is used to avoid distorting the result.
Using the Accounts Receivable Turnover Calculator
The Excel receivables turnover ratio calculator, available for download below, is used to compute accounts receivable turnover by entering details relating to the net credit sales and the opening and closing accounts receivable balances. The calculator is used as follows:
- The net credit sales is entered. Net credit sales is found on the income statement of the business.
- The opening and closing accounts receivable balances are entered. The opening and closing accounts receivable are found on the balance sheet of the business. The accounts receivable turnover calculator calculates the average value of accounts receivable during the accounting period, and the accounts receivable turnover.
There is no correct value for the accounts receivable turnover as it depends on the industry in which the business operates. It is useful to compare the calculated figure with other businesses in your industry using figures available from published financial statements.
Accounts Receivable Turnover Calculator Download
The accounts receivable turnover spreadsheet is available for download in Excel format by following the link below.
Users use this accounts receivable turnover calculator at their own risk. We make no warranty or representation as to its accuracy and we are covered by the terms of our legal disclaimer, which you are deemed to have read. This is an example of an accounts receivables turnover accounting tool that you might use when considering how to calculate accounts receivable turnover. It is purely illustrative. This is not intended to reflect general standards or targets for any particular business, company or sector. If you do spot a mistake in this account receivable turnover calculator, please let us know and we will try to fix it.
About the Author
Chartered accountant Michael Brown is the founder and CEO of Double Entry Bookkeeping. He has worked as an accountant and consultant for more than 25 years and has built financial models for all types of industries. He has been the CFO or controller of both small and medium sized companies and has run small businesses of his own. He has been a manager and an auditor with Deloitte, a big 4 accountancy firm, and holds a degree from Loughborough University.