What Does Your A/R Turn Rate Say About Your Business?
Accounts Receivable (A/R) Turnover is a financial metric that measures how efficiently your company is able to collect customer payments. It’s an important metric in that it provides insight into your company’s cash flow and financial health. Because of its impact on your business, A/R Turnover (Turn) needs to be monitored. If your optimal Turn rate changes in any way, you need to understand why.
A high Turn rate (meaning the A/R is turning faster with lower number of days an invoice is outstanding) indicates that credit sales are quickly converting into cash which can be used to pay off debts or invest in growth. Keeping your Turn rate steady with collection procedures that help ensure well-timed payments year-round is reflected in increased cash flow, decreased financing costs and in your lender’s willingness to provide your business with financing. Conversely, a low Turn rate (meaning the A/R is turning slower with a higher number of days an invoice is outstanding) suggests problems with collections. When you have a Turn problem, you will inevitably have a borrowing problem both in terms of an increase in financing costs and even in the ability to borrow at all.
To see how your company’s A/R Turn affects your financing costs, check out the quick and easy-to-use A/R Turn Calculator on our website 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.
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.