How To Calculate Accounts Receivable Turnover in SAP | Arithmix

Learn how to calculate accounts receivable turnover in SAP with our comprehensive guide. Discover the key metrics and techniques to optimize your financial management and improve your business performance. Start maximizing your revenue and minimizing your risk today.

Calculating accounts receivable turnover is an important aspect of managing your business finances. It helps you understand how quickly your customers are paying their invoices, which can impact your cash flow and overall financial health. While there are different ways to calculate accounts receivable turnover, one common method is to use the formula:

Accounts Receivable Turnover = Net Credit Sales / Average Accounts Receivable

Net credit sales refer to the total amount of sales made on credit, minus any returns or discounts. Average accounts receivable is the average amount of money owed to you by your customers over a certain period of time. This can be calculated by adding the beginning and ending accounts receivable balances for the period and dividing by two.

Once you have these numbers, simply divide net credit sales by average accounts receivable to get your accounts receivable turnover ratio. This ratio indicates how many times your accounts receivable is collected and replaced during the period.

What Is Accounts Receivable Turnover?

Accounts receivable turnover is a financial metric that measures how quickly a company collects payments from its customers. It is an important indicator of a company's financial health, as it can impact cash flow, profitability, and liquidity. A high accounts receivable turnover ratio indicates that a company is collecting payments quickly, while a low ratio may suggest that a company is struggling to collect payments in a timely manner.

Accounts receivable turnover can also be used to compare a company's performance to industry benchmarks or to track changes over time. By monitoring this metric, companies can identify areas for improvement and make informed decisions about their credit policies and collection efforts.

When Is It Valuable To Calculate Accounts Receivable Turnover?

Calculating accounts receivable turnover is valuable for any business that extends credit to its customers. It can help you understand how quickly your customers are paying their invoices, which can impact your cash flow and overall financial health. It can also help you identify potential issues with your credit policies or collection efforts, and make informed decisions about how to improve your processes.

Additionally, accounts receivable turnover can be a useful metric for investors or lenders who are evaluating a company's financial health. A high accounts receivable turnover ratio may indicate that a company is well-managed and has strong cash flow, while a low ratio may suggest that a company is struggling to collect payments and may be at risk of financial distress.

Overall, calculating accounts receivable turnover is a valuable tool for any business that wants to stay on top of its finances and make informed decisions about credit policies, collection efforts, and overall financial management.

How Do You Calculate Accounts Receivable Turnover in SAP

SAP 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 SAP and build out dashboards.

What is Arithmix?

Arithmix is the next generation spreadsheet - a collaborative, web-based platform for working with numbers that’s powerful yet easy to use. With Arithmix you can import data from systems like SAP, 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.