Managing your accounts receivable (AR) turnover should be your top agenda if you are a business owner. The money you earn will be counted as revenue only when it is received from your clients and not the money on credit. 

So, the smoother AR mechanisms you have, the better your chances of collecting customer payments and improving your cash flow are. Not only will this lead to long-term business success, but it will also receive your accounts payable process. Before we move on to the techniques you can use to improve your AR, let us know how to calculate it. 

What does AR turnover denote?

AR turnover is a measure of how effectively your business can convert its receivables into cash. Here is a formula to calculate the same: 

Net Credit Sales/Average accounts receivable =Accounts receivable turnover ratio.

Net Credit sales: total credit sales for the accounting period

The average AR ratio can be done by adding figures at the start and then at the end. Post that, you need to divide the result by two. Make sure you take the same period of measurement for your credit sales, and AR receivable should be the same. 

One way to eliminate errors in the process is to use free accounting software for business and then compare the figures. 

Why does your AR turnover matter?

Simply put, high the AR turnover ratio, the more cash your business has to cover its expenses and pay off debts. At the same time, a poor ratio is a warning that you need to work on your 

  • Credit control policies,
  • Making your client base financially reliable

Luckily, you can get access to all these insights with business management software free of cost. It will examine your credit terms receivable process and protect your financial well-being. Now that you are clear with the basics let’s note how you can improve the turnover ratio and scale your business. 

8 Tips to boost your AR turnover

1. Nurture relationships

The sure shot way to strengthen your AR ratio is to nurture client relations. Happier clients are more likely to pay you upfront. Small gestures like email check-ins, sending thank you notes from time to time, and informing them about offers first can drastically impact your payment collections. 

2. Invoice on time (Without Fail)

Invoice On Time (Without Fail)

Just like good handwriting is easy to read and understand, the same is the case with accurate and detailed bills. While this is one thing, make sure you send them on time and avoid delays. 

You don’t want your clients to forget to pay you. Besides, it is easier for clients to clear regular bills than clearing quarterly payments at once. With your online accounting software in place, you can automate the process and never worry about missed invoices. 

3. Mention payment terms clearly 

Another way to set your AR for success is by adding terms that even a child can understand. Jokes apart, make sure you send invoices quickly, request for payments within 30 days, and add late payment charges as well. Also, if your products are priced high, you may consider offering payment plans and setting credit limits with your free accounting software for business. 

4. Use cloud accounting software

Use Cloud Accounting Software

These solutions let you simplify your billing and accounts processes to a great extent. You can easily get hold of your data and collaborate with the accounts team in real-time. 

Download Accounts Receivable Aging Report!

5. Uncomplicate payments 

Management of multiple payments options can be done with business management software free of cost. This will also make it easier to adapt to the accounts payable methods of your client. The result? You get paid on time and sometimes before time also! 

Stay at par with competitors by offering credit/debit card payments, Stripe, PayPal, and integrating solutions like PayPal and Stripe. 

6. Switch to fixed-fee billing

Many businesses are cutting down on AR headaches by making a shift to fixed-fee billing. These arrangements let you collect automatic payments on the same date each month. This lets both parties achieve clarity and say goodbye to payment-related issues. 

7. Streamline following up processes 

Streamline Following Up Processes

Yes, no one likes to get involved in boring follow-up calls. Luckily, it is another reason to follow your tips for getting your AR turnover right and eliminate them altogether. 

You can easily streamline your collection process, layout clear policies with your cloud accounting software, and have payment terms sorted. While you cannot fully avoid mistakes, reducing them upto 99% is surely possible. In cases of missed payments, just send a polite reminder, and we are sure your clients will surely appreciate them. 

8. Get your reconciliation processes right

Online accounting software can easily streamline the reconciliation of accounting records. Make sure to reconcile outstanding invoices and clear off your receivables list as soon as you collect your payments. This will keep your AR balance in check and even track your turnover ratio.  

Also Read: Steps to Prepare Accounts Receivable Aging Report

Wrapping up 

To achieve a good AR ratio, you will need to invest in good cloud accounting software. It will also make the process simple, make monitoring easy, and help you spot trends in your accounts payable process. Besides, when you have all the information in hand, you will be able to make better business decisions. 

Moon Invoice is a solution that can help you streamline your AR and AP processes. If you wish to know more about our offerings, we can be contacted at +1-805-491-9393, or you can also write to us at support@mooninvoice.com.

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