Accounts Receivable Turnover ratio
Financial Dictionary — Receivables & Payables
Definition
It is a financial ratio and it measures the ratio of net credit sales to average accounts receivable, which is a measure of how quickly customers pay their bills.
Use cases, Example & Why it matters
Use cases
- Used in the purchase-to-pay cycle to validate invoices, approvals, and supporting documents.
- Used to strengthen internal controls over purchasing and supplier payments.
- Used to strengthen internal controls over purchasing and supplier payments.
Example
- Example: Before payment, the AP team applies **Accounts Receivable Turnover ratio** to confirm the invoice matches the approved purchase documentation.
Why it matters
- Why it matters: Prevents incorrect/duplicate payments, reduces fraud risk, and improves accuracy of payables and expenses.