Your accounts receivable (AR) turnover ratio is the rate with which your business collects its average accounts receivables. It’s calculated by dividing your total credit sales by the average of your accounts receivable. You can use the AR calculator on our page to check how quickly your invoices are turning into actual money.
If your result is somewhere between 40 to 45, you’re doing fine, but if it’s over 50, then you aren’t getting paid quickly as you should be. While you’re there, you should also check out our other helpful financial calculators. They will help you understand the effectiveness of your credit and collection policies.
You could have a less than ideal accounts receivable ratio for a variety of reasons. Perhaps your collection policies need to be improved or your customers are facing financial problems. You may be extending credit to easily. With an undesirable AR turnover ratio, you could run into a cash crunch.
With cash flow problems, you may find it challenging to pay your vendors, operational expenses, buy inventory or struggle with debt repayments. You may also miss lucrative business opportunities or fail to qualify for loans. On the other hand, healthy cash flow can benefit your business in a variety of ways.
There are a variety of ways for your business to improve your AR turnover ratio. Many of these are specific to industries. For example, businesses that benefit from our medical revenue debt collection services can improve their AR turnover ratio by encouraging clients to invest in health insurance or a savings account to pay for unexpected medical expenses on time. Likewise, those who use our commercial tenant collections can improve their accounts receivables by only renting to businesses that have excellent references from their previous landlords.
However, there are several ways any business can improve its AR turnover ratio, regardless of industry.
#1 Accounts Receivable Consulting
At Summit A*R, we’ve been offering excellent business to business debt collection for over two decades to a variety of clients across many industries. With our experience, we know a thing or two about AR turnover ratios.
Our seasoned account receivable management professionals can help you increase cash flow and reduce bad debt write-offs with their insight. Moreover, we can show you to improve customer retention in the process.
#2 Pre-Collection Services
If your (AR) turnover ratio is low, then perhaps you need to try our pre-collection services instead of wasting your in-house collections department when they could be more valuable in other areas of your organization. Simply leave all the “busy-work” in your current AR cycle out to a company you can trust to represent you professionally and with no complaints from your clients.
#3 Debt Collection Services
If your company needs help in converting unpaid invoices into cold hard cash, then partner with one of the best debt collection agencies in the country. At Summit A*R, we boast twice the national recovery rate across a broad range of industries and debt types.
Various statistics suggest that debt grows harder to recover with time, so don’t hesitate. Use our services before your revenue is nearly impossible to collect. At Summit A*R, we have a wealth of resources that help us find success in a variety of situations. Over the years, we’ve recovered some particularly difficult debt due to these resources and a team of tireless and licensed professionals who don’t know the meaning of the word quit.
One of the tools we use to improve collection is pre collection services, where we handle much of the busy work that your clinic puts into recovering payment, including patient billing, telephone follow-ups and helping patients understand their balances.
At Summit A*R we take a different approach than some other debt collection agencies. We brought humanity back to collections with our “P.H.D. Philosophy” (Preserve Human Dignity). This means that we treat people with dignity and respect. As evidenced by our high recovery rate, our philosophy works. Most people want to pay their debts and usually clear their debts when accounts are treated with sensitivity and compassion.
Not only is our methodology effective, but it’s good for business. With our diplomatic approach as friendly debt collectors, you preserve your reputation and the relationships that you developed with other businesses. We believe that customers are the lifeblood of your business and act accordingly. It’s possible that your customer wants to pay but is facing a temporary financial setback. Deal with them fairly and you could gain their loyalty for a lifetime. That same debtor could go on to become your best client.
For more stubborn accounts, we have a few other options.
- Credit Bureau Reporting: Unlike your in-house collection department, we can report debtors to the three credit bureaus at no additional cost to you. Consumers and businesses value their credit scores and are often motivated to meet their obligations when they realize that their credit could be negatively impacted.
- Comprehensive Skip Tracing: All is not lost if your debtor has skipped town and you can’t locate them. We can find them with our skip tracing team. This department is led by a private investigator and is supported by state-of-the-art technology that gives us a higher find-rate than other agencies. We’d say that we have the art of locating debtors and their assets down to a science. We can transform your bad debt into bottom-line revenue.
- Full-Service Litigation: Thankfully, our collection team is more than capable of managing most of our accounts. However, a minority of accounts can benefit from our full-service litigation program after all other efforts have been exhausted. Here, our licensed private investigator completes a thorough financial investigation of the entity that owes you money. Once the cost-benefit analysis is complete, we can take legal action with the assistance of our affiliated attorney and your written authorization. Otherwise, the account is returned to the pre-legal queue for further action.
Because of our experience, resources, effectiveness, affiliations, and A+ rating from the Better Business Bureau (BBB), many businesses falsely assume that they can’t afford to work with a premier debt collection agency like ours.
On the contrary, we offer our services to businesses of all sizes and try to remain accessible by demanding zero payments upfront. That’s right. Our value proposition is that we only get paid when we’ve successfully recovered your revenue. What’s more, unlike other debt collection agencies, we have no mandatory minimums. We will work with your business whether you bring us one account or several. So, if you need help improving your AR turnover ratio, then give us a call today or request a callback through our website. Our friendly professionals are looking forward to assisting you.
Categorised in: Our Blog
This post was written by Summit A•R