Business Owners: How A/R Turn Affects Your Business
True or False. Take this short quiz to see how much you understand about A/R (Accounts Receivable) Turn and its importance to your business:
- Your A/R Turn rate tells you how long it’s taking your customers to pay your invoices.
- It’s one of the most important statistics lenders look at when deciding whether or not to give you a loan on your A/R.
- A changing Turn rate (up or down) is a sign that something is going on of which you need to be aware.
- Customers’ timely paying of your invoices provides you increased cash flow.
- Businesses with better turning A/R have decreased financing costs.
If you answered true to all statements, congratulations. If you answered false to any or didn’t know how to answer, you need to bone up on the importance of A/R Turn in managing your business because it impacts your business in many ways.
There’s a saying: A/R Turn never lies. That means if your optimal turn rate changes in any way, you need to understand why. The benefits of knowing your turn rate and keeping it steady with collection procedures that help ensure well-timed payments year-round is reflected in increased cash flow, decreased financing costs and in lenders’ willingness to provide your business with financing.
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 our easy-to-use calculator. It’s available here.
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.