# Accounts Receivable Turnover Calculator

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.

Accounts receivable turnover = Net credit sales / Average accounts receivable

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.