14 Practical Tips to Improve Construction Accounts Receivable Turnover Ratio In a Recession
Updated: May 15
In 2023, many contractors are worried about the economic downturn and its impact on the construction industry. During a recession, collecting payments can be challenging. Clients may dispute invoices or request payment extensions. This can lead to delayed payment cycles and hurt cash flow.
Accounts receivable turnover (ART) is a good indicator of your company's payment speed. Having a high accounts receivable turnover (ART) ratio is a crucial way to maintain cash flow. In this blog post, we'll share 14 tips to improve your ART. Using these tips, you can ensure your business can thrive and survive in any climate.
Table of Content:
What is Accounts Receivable Turnover?
Accounts receivable turnover measures how quickly you are collecting payments from your customers. It's calculated by dividing your net credit sales by the average A/R balance. The resulting number indicates how often your business collects its receivable balance over a payment term.
Accounts Receivable Turnover Ratio Formula
The accounts receivable turnover formula is:
ART = Net Credit Sales / Average Accounts Receivable
If you are curious about how to calculate accounts receivable turnover and want to learn more about the formula, check out our blog post.