A/R Turn Rate Never Lies. What’s Your Turn Rate Telling You?
Do you know the turnover rate of your receivables? You should. It’s one of the most important numbers to know because it tells you how long it’s taking your customers to pay your invoices. A/R (accounts receivable) Turn is one of the most important statistics asset based lenders look at when deciding whether or not to give a business a loan on its A/R.
There’s a saying: A/R Turn never lies. That means if your turn rate changes in any way (increases or decreases), something’s going on, and you need to understand what that is. The benefits of knowing your turn rate and having customers pay your invoices in a timely manner is reflected in increased cash flow, decreased financing costs and in lenders’ willingness to provide you with financing.
In the current environment, thanks to government stimulus money (PPP and EIDL), your customers may be flush with cash and are paying your invoices quickly. But that’s not necessarily going to be the case going forward (and may not have been the case before the stimulus packages). Understanding your company’s optimal turn rate will enable you to stay in control of it with collection procedures that help ensure well-timed payments year-round.
To see how well your A/R is currently turning and the impact various turn rates have on your yearly financing costs, we invite you to try the easy-to-use calculator we have on our website at
https://www.celticcapital.com/accounts-receivable-calculator.
About Celtic Capital
Companies looking for working capital to cover operating expenses, fund growth, increase buying power and take advantage of vendor discounts and rebates turn to Celtic Capital. With an appetite for the more complex transactions, Celtic Capital has a history of success in crafting creative, flexible asset based financing solutions from $500,000 to $5 million with no financial covenants.
As an independent lender, working with companies nationwide, Celtic Capital is willing and able to alter price and deal structure and expand lines of credit to handle its clients’ increased revenues; and when cash flow is an issue, will look toward providing an inventory facility to help offset lost cash flow.
If you know of, or are, a business in need of non-traditional financing, contact Mark Hafner at 800.742.0733 or mhafner@celticcapital.com, or visit us at www.celticcapital.com.