How To Calculate Accounts Receivable Turnover in HubSpot | Arithmix

Learn how to calculate accounts receivable turnover in HubSpot with this step-by-step guide. Improve your financial analysis and gain insights into your business's cash flow.

Accounts receivable turnover is an important financial metric that measures how efficiently a company is collecting payments from its customers. It is a ratio that indicates the number of times a company collects its average accounts receivable balance over a given period. Calculating accounts receivable turnover in HubSpot is a simple process that can be done with just a few steps.

What Is Accounts Receivable Turnover?

Accounts receivable turnover is a financial ratio that measures the efficiency of a company's credit and collection policies. It is calculated by dividing the net credit sales by the average accounts receivable balance during a specific period. The ratio indicates how many times a company collects its average accounts receivable balance during a year. A higher accounts receivable turnover ratio indicates that a company is collecting payments from its customers more quickly, which is a positive sign for investors and creditors.

For example, if a company has net credit sales of \$1,000,000 and an average accounts receivable balance of \$250,000, its accounts receivable turnover ratio would be 4. This means that the company collects its average accounts receivable balance four times a year.

When Is It Valuable To Calculate Accounts Receivable Turnover?

Calculating accounts receivable turnover is valuable for companies that offer credit to their customers. It helps them to understand how quickly they are collecting payments from their customers and whether their credit and collection policies are effective. A high accounts receivable turnover ratio indicates that a company is collecting payments from its customers quickly, which can improve its cash flow and reduce the risk of bad debt. A low accounts receivable turnover ratio, on the other hand, indicates that a company is taking longer to collect payments from its customers, which can result in cash flow problems and increase the risk of bad debt.

Investors and creditors also use accounts receivable turnover ratio to assess a company's financial health and creditworthiness. A high accounts receivable turnover ratio indicates that a company is managing its accounts receivable effectively, which can be a positive sign for investors and creditors. A low accounts receivable turnover ratio, on the other hand, may indicate that a company is struggling to collect payments from its customers, which can be a red flag for investors and creditors.

In conclusion, calculating accounts receivable turnover in HubSpot is a simple process that can provide valuable insights into a company's financial health and creditworthiness. By understanding how quickly a company is collecting payments from its customers, investors and creditors can make informed decisions about whether to invest in or lend money to a company. Companies can also use accounts receivable turnover ratio to improve their credit and collection policies and manage their cash flow more effectively.

How Do You Calculate Accounts Receivable Turnover in HubSpot

HubSpot itself isn't naturally geared towards letting you calculate complex metrics like Accounts Receivable Turnover. As an alternative, teams typically use products like Arithmix to import data from HubSpot and build out dashboards.

What is Arithmix?

Arithmix is the next generation spreadsheet - a collaborative, web-based platform for working with numbers you'll powerful yet easy to use. With Arithmix you can import data from systems like HubSpot, combine it with data from other systems, and create calculations like Accounts Receivable Turnover.

In Arithmix, data is organized into Tables and referenced by name, not by cell location like a spreadsheet, simplifying calculation creation. Data and calculations can be shared with others and re-used like building blocks, vastly streamlining analysis, model building, and reporting in a highly scalable and easy to maintain platform. Data can be edited, categorized (by dimensions) and freely pivoted. Calculations are automatically copied across a dimension - eliminating copy and paste of formulas.