Accounts Receivable Turnover
The A/R Turnover ratio measures how many times per year a business collects its average accounts receivable balance:
A/R Turnover = Net Credit Sales / Average Accounts Receivable
A ratio of 12 means you collect your average A/R balance every 30 days.
DSO — Days Sales Outstanding
DSO expresses A/R turnover in days, which is easier to benchmark against payment terms:
DSO = Average A/R / Net Credit Sales × 365
DSO and A/R Turnover are mathematical inverses: high turnover = low DSO.
Why A/R Turnover Matters
Slow collections tie up working capital. A company with $500k in receivables that should be $300k has $200k in cash locked up unnecessarily — money that could be used to fund operations or pay down debt.
Monitoring A/R turnover over time reveals collection trends before they become cash flow crises.
Use the A/R Turnover Calculator to compute your ratio and DSO.