How To Calculate Accounts Receivable Turnover in SAP Business One | Arithmix

Calculating accounts receivable turnover is an important aspect of managing your business's finances. It helps you understand how quickly your customers are paying their bills and how efficiently you are collecting payments. In this article, we will discuss what accounts receivable turnover is, when it is valuable to calculate it, and how to calculate it using SAP Business One.

What Is Accounts Receivable Turnover?

Accounts receivable turnover is a financial ratio that measures how many times a company collects its average accounts receivable balance during a specific period. It is calculated by dividing the net credit sales by the average accounts receivable balance. The result is a number that represents the number of times a company collects its accounts receivable balance in a year.

For example, if a company has $1,000,000 in net credit sales and an average accounts receivable balance of $100,000, the accounts receivable turnover ratio would be 10. This means that the company collects its accounts receivable balance 10 times in a year.

When Is It Valuable To Calculate Accounts Receivable Turnover?

Calculating accounts receivable turnover is valuable for several reasons. Firstly, it helps you identify how efficiently you are collecting payments from your customers. A high accounts receivable turnover ratio indicates that you are collecting payments quickly, which is a positive sign for your business's cash flow.

Secondly, it helps you identify potential issues with your credit policies. If your accounts receivable turnover ratio is low, it may indicate that you are extending credit to customers who are not able to pay their bills on time. This can lead to cash flow problems and may require you to adjust your credit policies.

Finally, calculating accounts receivable turnover is valuable for benchmarking purposes. You can compare your accounts receivable turnover ratio to industry averages to see how your business is performing relative to your competitors.

How to Calculate Accounts Receivable Turnover in SAP Business One

Calculating accounts receivable turnover in SAP Business One is a straightforward process. Firstly, you need to generate a report that shows your net credit sales for a specific period. This report can be found in the Sales Analysis module.

Next, you need to generate a report that shows your average accounts receivable balance for the same period. This report can be found in the Receivables Aging module.

Once you have both reports, you can calculate your accounts receivable turnover ratio by dividing your net credit sales by your average accounts receivable balance. The result will be a number that represents the number of times you collect your accounts receivable balance in a year.

In conclusion, calculating accounts receivable turnover is an important aspect of managing your business's finances. It helps you understand how efficiently you are collecting payments from your customers and can help you identify potential issues with your credit policies. By following the steps outlined in this article, you can easily calculate your accounts receivable turnover ratio using SAP Business One.

How Do You Calculate Accounts Receivable Turnover in SAP Business One

SAP Business One 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 Business One 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 Business One, 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.

Arithmix is fully collaborative, giving your entire team access to your numbers and the ability to work together seamlessly.

Calculating Accounts Receivable Turnover in Arithmix

Calculating metrics like Accounts Receivable Turnover is simple in Arithmix. Once you've created your free account, you’ll be able to import your SAP Business One data, and use it to create natural language formulas for metrics like Accounts Receivable Turnover.

Arithmix is designed to give you the power to build any calculations you want on top of your SAP Business One data, while also being easy to use and collaborate on. You can share your dashboards with users inside and outside of your organisation, making it easy to empower your whole team.