Receivables turnover / Receivables turnover ratio

The turnover speed of customers provides information on the payment discipline of the company's customers. It shows the average number of times the receivables stock is replaced during a business year.

In order for a business to operate stably can be financed (always have enough money available to pay the bills), you need to know how the income flows in. It is therefore necessary to know how our customers fulfill their liabilities. This is shown by the turnover speed of customers indicator.

During its calculation, the given period (for example, a business year) average sales revenue shared with the average customer base. The result indicates the average number of times the company's receivables are changed in the given period. In principle, a high value indicates that the company works well in this area: its customers' willingness to pay and payment discipline are good. 

Often, they do not examine the turnover speed, but rather the customers' turnover time, the average collection time. When calculating this, the average receivables are multiplied by the number of days in the period and divided by the average income of the period. The indicator indicates how many days the company's customers pay on average. A high value is not favorable, because the company finances its customers for a long time, moreover, in such cases, there may often be expired or uncollectible customer receivables. A low value is favorable in principle, but it can also cause a loss of market if a company pursues a collection policy that is too strict (stricter than its competitors). 

The turnover speed of customers is a turnover speed of suppliers, and the turnover speed of inventory along with indicators, the established financial plan they provide useful information for the preparation, but of course the financial institutions also examine it, if the company liquidity in order to improve it credit would like to hire.