USA Accounts Receivable Ratios

[Jessybell131]

Hi everyone! So this is my first post here and I wish I knew about this site sooner. My question might be silly to some but I'd really appreciate the feedback!

I am trying to add some new KPIs to a monthly financial spreadsheet I provide my boss. I was looking for the easiest way to calculate an accounts receivable ratio. Any help is welcomed!

 

[bklynboy]

The typical ratio is credit sales / Avg receivable balance over some period. Higher the better in general.

 

[Fidget]

If it's for introducing KPIs then the 'debtors days' calculation will be a good starting point as it will show you how long on average it is taking your debtors to pay. Benchmark that against payment terms to see the level of aged debts ie debts not paid within repayment terms. You might have to do that in segments if debtors have different payments terms. The norm is 30 days, but it can be anything by agreement.

Where the KPI will come in is more about what's being done to collect aged debts rather than just a figure showing the level it's at. So that's going to take you into the realms of looking at current credit control processes and how they can be improved. Then set a target reducing it by £x amount over whatever period of time. The KPI will essentially be the measure of whether or not credit control processes are working.