Account receivable Turnover is a measure of frequency of payment you are getting from your customer. Cash flow should be streamlined for your business. Credit sale money should be collected quickly because higher ratio indicates that your customers are paying your money in fixed time allotted to them. The formula for account receivable turnover is net credit sales divided by average account receivable.
If your customer purchases goods and services but the time period exceed for returning your money then you can send invoices. Sending invoices is not a good way for your long term client. Invoices are the legal ways for collecting your money. There are two main factors that affect account receivable turnover. Your payment terms and condition should not be too tight because your competitors can take benefit. Many companies set payment terms in 30 days. You can shorten your credit extended days. Your billing efficiency plays a major role so try to give some incentives for rapid payment of invoices. So if youraccount receivable turnover is high that means you are running a smart business.
It takes about two weeks to arrange a factoring agreement with a factoring company. Once you do that, you have access to ready cash each time you issue an invoice to a creditworthy customer.
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