When it comes to managing cash flow, accounts receivable turnover is a metric that deserves serious attention. It shows how efficiently your business is collecting payments from customers and how often you’re turning invoices into actual cash.
If the number’s too low, it could mean late payments, customer issues, or internal inefficiencies that are quietly holding your business back.
So what can you do to take back control?
Why Accounts Receivable Turnover Matters
A healthy accounts receivable turnover ratio means you’re collecting payments quickly and regularly. This gives you more working capital to reinvest, reduces reliance on credit, and boosts financial confidence when scaling your operations.
But when turnover slows, the risks start to build:
- Cash flow becomes harder to predict
- Collections take longer
- Your team spends more time chasing, less time analysing
That’s why improving this metric is all about running a smarter, leaner finance function. Instead of focusing on getting paid faster, it’s important to take a holistic approach, covering all your bases and making sure to get the foundation right.
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Measures To Improve Accounts Receivable Turnover
Here are some practical steps to tighten control and keep your turnover rate in a healthy range:
1. Invoice quickly and accurately
The sooner your invoices go out, the sooner the clock starts. Use automated systems where possible to eliminate delays and reduce manual errors. Accuracy builds trust and fewer disputes mean faster payments.
2. Set clear credit terms
Not all customers need the same terms. Tailor payment deadlines based on credit history or past behaviour. And make sure terms are clearly stated on every invoice.
3. Offer simple, flexible payment options
Making it easier for customers to pay can significantly improve accounts receivable turnover. Remove friction, and the money flows faster. Offering discounts for early payments also helps to create an incentive for faster payment.
4. Automate your follow up reminders
Consistent reminders work. Set up automatic email prompts or SMS nudges before and after due dates. Don’t wait until payments are overdue to act. Better yet, get an automated system that flags customers who haven’t paid within a certain period to take a proactive approach.
5. Track your metrics in real-time
Monitor your accounts receivable turnover ratio regularly, not just at month-end. Having visibility into how you’re trending allows you to adjust before issues snowball.
6. Resolve disputes quickly
Disputes stall payments. Make sure your team has access to relevant order, delivery, and invoice data so they can act quickly and reduce DSO (Days Sales Outstanding).
Don’t Let Overdue Invoices Pile Up
Improving accounts receivable turnover is about building a system that encourages fast, easy, and accurate payments. While sending reminders are helpful, exploring proactive ways such as getting a reputable provider to handle your receivables can also help to go a long way.
By standardising your workflows, automating where it counts, and keeping a close eye on your receivables data, you can create a process that scales smoothly as your business grows. Explore our Accounts Receivable solutions to discover your options.