<p>Being a Chief Financial Officer of an organization takes work. You need to be updated and be a step ahead to lead your team. &nbsp;</p>

<p>The CFO&#39;s role has taken on a whole new dimension with the fast-paced, interconnected world we live in today. There are more tools to make life easier, and there is more data to capture. But technology can be overwhelming and, at the same time, intimidating. &nbsp;</p>

<p>With so many options, CFOs need to keep up to date with the latest <strong><a href="https://www.maxyfi.com/lp/accounts-receivable-software" target="_blank">accounts receivable</a></strong> innovations to help their companies work smarter to save resources and time. &nbsp;</p>

<p>To succeed with digital transformation, the right technologies must be adapted. By implementing it, businesses will be able to scale sustainably and remain competitive for years to come. &nbsp;</p>

<p>&nbsp;</p>

<h2><strong>5 Best Accounting Technologies:</strong> &nbsp;</h2>

<p>Emerging accounting technologies are designed to help businesses become more efficient, transparent, and scalable in their accounting function. Accounting innovations can help businesses become more sustainable in the future. It also provides a competitive edge and creates a more informed, knowledgeable workforce. Considering this, every CFO should become proficient with the 5 best innovations in accounting and finance that can help them transform their businesses. &nbsp;</p>

<p>&nbsp;</p>

<h3><strong>1. Cloud Accounting System: &nbsp;</strong></h3>

<p>Cloud accounting systems are a form of accounting technology that allows financial data to be stored, processed, and accessed via the internet through remote servers maintained by a third party. Cloud accounting solutions, as opposed to desktop software, allow users to access their financial data from any device with an internet connection, offering real-time updates and collaborative options for numerous users.&nbsp; &nbsp;</p>

<p><strong>Among the demonstrated advancements that cloud accounting solutions provide for CFOs are: </strong>&nbsp;</p>

<ol>
	<li>
	<p><strong>Real-time financial visibility: </strong>With access to real-time data on sales, costs, cash flows, and other financial parameters, CFOs can gain a real-time snapshot of their company&#39;s financial health. As a result, they can make educated judgments swiftly and correctly. &nbsp;</p>
	</li>
	<li>
	<p><strong>Increased cooperation and accessibility:</strong> With safe access restrictions and authorization settings, cloud accounting solutions enable numerous people to access the same financial data at the same time, from anywhere in the globe. &nbsp;</p>
	</li>
	<li>
	<p><strong>Cost savings:</strong> Cloud accounting systems eliminate the need for costly on-premise hardware, software, and IT infrastructure, lowering expenses while enabling scalability and flexibility as the business expands. &nbsp;</p>
	</li>
	<li>
	<p><strong>Automated procedures and workflows:</strong> Cloud accounting solutions have capabilities that automate mundane chores like invoicing, bill payments, and reconciliations, freeing up time for CFOs to focus on strategic planning and analysis. &nbsp;</p>
	</li>
	<li>
	<p><strong>Advanced reporting and analytics:</strong> Cloud accounting solutions have comprehensive reporting and analytics tools that provide insights into important financial indicators and trends, allowing CFOs to make data-driven choices and uncover possibilities for development and optimization. &nbsp;</p>
	</li>
</ol>

<p>In general, cloud accounting solutions give CFOs more control, flexibility, and efficiency in handling their company&#39;s financial data, while also lowering expenses and boosting cooperation and accessibility. &nbsp;</p>

<p>&nbsp;</p>

<h3><strong>2. Accounting Integration Software: &nbsp;</strong></h3>

<p>Accounts Receivable Software is a type of technology that automates the process of combining financial data from many sources, such as bank accounts, credit card transactions, and accounting software. This tool can save time and prevent errors by automatically reconciling transactions, updating financial records, and providing reports. &nbsp;</p>

<p><strong>Accounts Receivable Automation Software can assist CFOs in accomplishing the following breakthroughs: &nbsp;</strong></p>

<ol>
	<li>
	<p><strong>Improved accuracy:</strong> Accounts Receivable Automation helps decrease errors and boost financial reporting accuracy by automating financial data integration. &nbsp;</p>
	</li>
	<li>
	<p><strong>Improved efficiency:</strong> By automating the process of reconciling transactions and updating financial records, <strong><a href="https://www.maxyfi.com/lp/accounts-receivable-software" target="_blank">accounts receivable software</a></strong> can help you save time and money. &nbsp;</p>
	</li>
	<li>
	<p><strong>Improved decision-making:</strong> CFOs may make more educated budgeting, forecasting, and other financial choices with real-time access to precise financial data. &nbsp;</p>
	</li>
	<li>
	<p><strong>Enhanced collaboration:</strong> Accounts Receivable Automation can improve collaboration across departments like finance and operations by offering real-time access to financial data. &nbsp;</p>
	</li>
	<li>
	<p><strong>Scalability:</strong> Accounts Receivable Software can scale up to handle higher amounts of financial data as a firm expands, eliminating the need for extra manual operations. &nbsp;</p>
	</li>
</ol>

<p>Accounts Receivable Software, in general, may assist CFOs in improving the accuracy, efficiency, and effectiveness of their financial operations, allowing them to make better-informed choices and drive corporate growth. &nbsp;</p>

<p>&nbsp;</p>

<h3><strong>3. Accounts Receivable Management Software: &nbsp;</strong></h3>

<p>Accounts Receivable Management Software is a sort of accounting software that assists organizations in managing their accounts receivable process. This application automates account receivable invoicing, payment processing, and collection, helping CFOs to optimize company financial processes and boost cash flow. &nbsp;</p>

<p><strong>Among the demonstrated achievements that CFOs may achieve with this technology are: &nbsp;</strong></p>

<ol>
	<li>
	<p><strong>Increased Cash Flow: </strong>Accounts Receivable Management Software allows organizations to expedite invoicing and payment processes, lowering the time it takes to collect payments from clients. This can assist CFOs in better managing their financial resources by improving cash flow.&nbsp;</p>
	</li>
	<li>
	<p><strong>Increased Efficiency: </strong>By automating the accounts receivable process, CFOs may eliminate manual duties and paperwork, allowing them to devote more time to strategic financial planning and analysis. Increased Accuracy: Accounts Receivable Management Software can assist in preventing mistakes that can arise with manual data input, enhancing financial information accuracy and lowering the risk of financial inconsistencies. &nbsp;</p>
	</li>
	<li>
	<p><strong>Improved Customer Relationships:</strong> Businesses can enhance their customer service and communication by using automated invoicing and payment reminders, resulting in better customer connections. &nbsp;</p>
	</li>
	<li>
	<p><strong>Improved Reporting:</strong> Accounts Receivable Management Software gives CFOs real-time access to financial data, allowing them to develop thorough reports and analyses to influence company decisions. This can assist CFOs in identifying patterns, predicting future economic hazards, and optimizing cash flow management. &nbsp;</p>
	</li>
</ol>

<p>&nbsp;</p>

<h3><strong>4. Digital Payments &nbsp;</strong></h3>

<p>The process of making online transactions via various online platforms and mobile applications is referred to as digital payments. This technology has resulted in several advancements for CFOs, including: &nbsp;</p>

<ol>
	<li>
	<p><strong>Improved efficiency:</strong> Because digital payments provide rapid and secure transactions, traditional payment methods demand less time and effort. This technology also automates various operations, such as invoicing and reconciliation, therefore improving the workflow of the financial department. &nbsp;</p>
	</li>
	<li>
	<p><strong>Increased accuracy:</strong> Because digital payments reduce the possibility of mistakes associated with manual data entry, financial records are more accurate. This system also allows for real-time payment tracking, offering a clear and timely picture of the company&#39;s financial condition. &nbsp;</p>
	</li>
	<li>
	<p><strong>Savings:</strong> Since digital payments eliminate the need for actual checks, related costs such as printing, shipping, and processing fees are reduced. This system also minimizes the time and effort necessary for manual reconciliation, saving the finance department money. &nbsp;</p>
	</li>
	<li>
	<p><strong>Improved security:</strong> Digital payments have high-level security measures like encryption and authentication, which reduce the danger of fraudulent activity. This technology also allows for the safe storage and transfer of financial data, assuring regulatory compliance. &nbsp;</p>
	</li>
</ol>

<p>In conclusion, digital payment adoption may considerably help CFOs by boosting efficiency, accuracy, cost savings, and security. &nbsp;</p>

<p>&nbsp;</p>

<h3><strong>5. Intuitive Reporting Dashboard </strong>&nbsp;</h3>

<p>The Intuitive Reporting Dashboard is an <strong><a href="https://www.maxyfi.com/lp/accounts-receivable-automation-software" target="_blank">accounts receivable automation</a></strong> system that enables CFOs and other financial professionals with real-time financial data visualization and reporting. The dashboard is user-friendly and straightforward, with adjustable features that allow users to adapt the data they get to their unique requirements. &nbsp;</p>

<p>The capacity of the Intuitive Reporting Dashboard to give accurate and up-to-date financial data in real time is one of its breakthroughs. This enables CFOs to make better-informed decisions and respond more swiftly to changing market circumstances or other variables affecting their company&#39;s financial performance. &nbsp;</p>

<p>Another significant advancement is the dashboard&#39;s capacity to give insights into critical financial parameters such as sales, costs, and profitability. CFOs can spot trends and patterns in this data that may highlight areas of the organization that need attention or improvement. &nbsp;</p>

<p>Advanced analytics capabilities, such as predictive modeling and scenario analysis, are also available through the Intuitive Reporting Dashboard. These capabilities enable CFOs to estimate future financial performance and simulate various company scenarios to better comprehend the possible implications of various actions. &nbsp;</p>

<p>Overall, the Intuitive Reporting Dashboard is a strong accounting system that provides CFOs with a variety of breakthroughs, such as real-time data, crucial financial insights, and sophisticated analytics capabilities, to help them make better decisions and drive greater corporate performance. &nbsp;</p>

<p>&nbsp;</p>

<h2><strong>Conclusion:</strong> &nbsp;</h2>

<p>If you would like to have a sophisticated dashboard that facilitates multi-users and gives you a clear picture of your company&#39;s payment dues and accounts receivable, Maxyfi is the right choice. &nbsp;</p>

<p>There are many more innovations that every financial team in the organization must adopt. Along with this modern world, we should improvise our strategies and bring in new advancements to cope with the new accounting and payment system. &nbsp;</p>

<p>The world is moving towards SaaS-based accounting products. &nbsp;</p>

<p>Why don&#39;t you then? Try Maxyfi, you won&#39;t regret it! &nbsp;</p>

<p>Also, Read our <strong><a href="https://www.maxyfi.com/blog" target="_blank">Maxyfi blogs</a></strong> to learn more about Accounts Receivable Automation!</p>


One error in accounting and finances can cost a lot, right? Here are some useful innovations CFOs can implement in their business now!

Maxyfi | 5 Proven Breakthroughs Every CFO Must Adopt!

One error in the accounting and finances can cost a lot, right? Then what if there are solutions to minimize such errors? Hear CFOs, take charge and implement these useful innovations in your business now!

5 Proven Breakthroughs Every CFOs Must Adopt! 

<p>Everything needs proper management to achieve promising results! Likewise your <strong><a href="https://www.maxyfi.com/lp/accounts-receivable-software" target="_blank">accounts receivable</a></strong>! &nbsp;</p>

<p>Hiring a person to follow up with your customers or third-party collection teams will not help you to recover the unpaid dues effectively! You need to efficiently manage the accounts receivable right from the beginning, for a lot of reasons.</p>

<p>But first, &nbsp;</p>

<p>&nbsp;&nbsp;</p>

<h2><strong>What is Accounts Receivable Management? &nbsp;</strong></h2>

<p>The Accounts Receivable Management strategy relies on the payment of invoices by customers. With a good accounts receivable management strategy in place, one can prevent overdue payments or non-payments which could disrupt the cash flow growth. This is an efficient solution to strengthen the financial health of the business. &nbsp;</p>

<p><strong>Accounts Receivable Management is like keeping track of your IOUs. </strong>&nbsp;</p>

<p>If you lent a buddy $100 and he promised to repay you in a week. The $100 is now considered an &quot;account receivable&quot; by you. &nbsp;</p>

<p>So what if a week passes and your friend still hasn&#39;t paid you back? You may send them a text message or call to remind them of their promise. This is known as &quot;communication.&quot;&nbsp; &nbsp;</p>

<p>Similarly, businesses have a lot of customers that owe them money for goods or services. The company must maintain track of all its receivables and ensure that they are paid on time. &nbsp;</p>

<p>To do this, the company employs an accounts receivable management system, which includes generating invoices, notifying customers of payment due dates, and following up on late payments. It&#39;s all about &quot;communication&quot; and making sure everyone is on the same page, much like telling your friend to pay you back. &nbsp;</p>

<p>Accounts receivable management assists organizations in avoiding cash flow issues and ensuring that they get paid for their job. &nbsp;</p>

<p>&nbsp;</p>

<h2><strong>5 Reasons Why You Should Have Efficient Accounts Receivable Management System: &nbsp;</strong></h2>

<p>&nbsp;</p>

<h3><strong>1) Enhances Your Cash Position&nbsp;&nbsp; &nbsp;</strong></h3>

<p>Accounts receivable management is the process of collecting payments from customers efficiently and consistently. Improving the business&#39;s financial situation is one way to increase the efficiency of accounts receivable management. &nbsp;</p>

<p>A solid cash flow gives a company more flexibility and resources to handle its accounts receivable successfully. These are some of the reasons why improving financial position is critical for compelling accounts receivable management: &nbsp;</p>

<ol>
	<li>
	<p><strong>Payment to Suppliers on Time:</strong> A solid financial position allows a company to pay its suppliers on time. This might assist the company in maintaining strong connections with its suppliers and ensuring a consistent supply of goods and services. &nbsp;</p>
	</li>
	<li>
	<p><strong>Reduced Need for Borrowing:</strong> When a company has a healthy cash flow, it is less reliant on borrowing to cover its expenses. This lowers the tax expenditure and other costs involved with borrowing, which can increase the business&#39;s profitability. &nbsp;</p>
	</li>
	<li>
	<p><strong>Ability to Provide Discounts:</strong> By improving its financial position, a company can provide discounts to customers who pay their invoices on time. This can encourage customers to make payments on time, reducing the average collection period and improving cash flow. &nbsp;</p>
	</li>
	<li>
	<p><strong>Improved Credit Management:</strong> A company&#39;s credit risk can be better managed if it has a solid cash position. It may provide loans to customers with a lower chance of defaults and more carefully monitor its customers&#39; creditworthiness. &nbsp;</p>
	</li>
	<li>
	<p><strong>Better Planning and Forecasting:</strong> A solid cash flow enables a company to better plan and anticipate its profitability. This helps businesses to better manage their accounts receivable, plan for potential deficits, and make smart financial decisions. &nbsp;</p>
	</li>
</ol>

<p>In conclusion, improving a company&#39;s financial position can offer the resources and flexibility needed to handle accounts receivable efficiently. It can assist in increasing cash flow, lower borrowing costs, and improving the company&#39;s financial health. &nbsp;</p>

<p>&nbsp;</p>

<h3><strong>2) Provides Control Over Cash And Working Capital&nbsp;</strong>&nbsp; &nbsp;</h3>

<p>An effective accounts receivable management system manages the process of collecting payments from customers that owe money to a business. One key component of this process is the management of cash and working capital, which is required to guarantee that an organization has the resources to satisfy its financial responsibilities while continuing to operate efficiently. &nbsp;</p>

<p>Controlling cash and working capital is critical for various reasons. For starters, it lets a business efficiently control its cash flow, which is crucial to preserving financial stability. A corporation may guarantee that it has enough money on hand to satisfy its short-term financial demands, such as paying payments and completing orders, by exercising control over its cash. &nbsp;</p>

<p>Second, having control over working capital allows an organization to properly manage its accounts receivable. This includes keeping track of outstanding invoices, following up with unpaid customers, and taking necessary action to collect overdue payments. Controlling working capital enables an organization to guarantee that it has the resources it needs to pursue delinquent invoices and collect payments on time. &nbsp;</p>

<p>Lastly, having control over cash and working capital is critical for risk management. A corporation may recognize possible risks and take actions to reduce them if it has a thorough grasp of its financial status. If a corporation, for example, has a significant number of outstanding invoices, it may face cash flow issues if those invoices are not paid on time. A corporation may handle these risks and maintain financial stability by having control over its working capital. &nbsp;</p>

<p>And at last, having control over cash and working capital is crucial for an effective<strong> <a href="https://www.maxyfi.com/lp/accounts-receivable-management-software" target="_blank">accounts receivable management system</a></strong>. An organization should guarantee that it has the resources it needs to function efficiently and collect payments from its customers on time by successfully managing cash flow, monitoring outstanding invoices, and eliminating risks. &nbsp;</p>

<p>&nbsp;</p>

<h3><strong>3) Increase The Accounts Receivable Collection Efficiency&nbsp;&nbsp; &nbsp;</strong></h3>

<p>The effectiveness of accounts receivable collection relates to how soon a corporation can collect payments owed from its customers. A high degree of efficiency in this area is crucial to a company&#39;s success since it immediately affects cash flow and financial health. &nbsp;</p>

<p>&nbsp;It is critical to improving the efficiency of the collection process to have an effective accounts receivable management system. This entails putting strategies and best practices in place to collect money as promptly and effectively as feasible. &nbsp;</p>

<p><strong>Pay stream Advisors reports that companies using automated accounts receivable management systems can: &nbsp;</strong></p>

<ul>
	<li>
	<p><strong>Reduce call preparation and prioritization time from 15% to 6%. &nbsp;</strong></p>
	</li>
	<li>
	<p><strong>Reduce dispute management time from 40% to 13%. &nbsp;</strong></p>
	</li>
	<li>
	<p><strong>Help spend more time soliciting payments from customers from 20% to 62%.&nbsp; &nbsp;</strong></p>
	</li>
</ul>

<p>One reason for this is that the longer it takes to collect cash from customers, the greater the chance of nonpayment. This can result in cash flow issues, as well as a drop in profitability and general financial health. Businesses can lower the risk of nonpayment and guarantee they have the cash flow they need to operate and expand by improving the efficiency of the collection process. &nbsp;</p>

<p>Another reason why enhancing accounts receivable collection efficiency is crucial is that it helps to build customer relationships. When a company can collect payments promptly and efficiently, it sends a message to customers that it is competent, organized, and dependable. This can aid in the development of trust and loyalty, both of which are necessary for long-term success. &nbsp;</p>

<p>In general, improving the effectiveness of accounts receivable collection is an essential component of a well-managed and successful organization. Businesses can decrease the risk of nonpayment, enhance cash flow, and establish great customer relationships by employing best practices and methods to streamline the collection process. &nbsp;</p>

<p>&nbsp;</p>

<h3><strong>4) Improves Customer Communication&nbsp;&nbsp; &nbsp;</strong></h3>

<p>For various reasons, improving customer communication is critical for an effective accounts receivable management system: &nbsp;</p>

<ol>
	<li>
	<p><strong>Timely payment:</strong> Communicating with customers about their outstanding debts clearly and effectively helps encourage them to make timely payments, lowering the overall accounts receivable amount and enhancing cash flow. &nbsp;</p>
	</li>
	<li>
	<p><strong>Dispute settlement:</strong> Effective communication can aid in the resolution of issues with invoicing or payment problems. It can assist in identifying and addressing issues quickly, reducing payment delays, and guaranteeing a better invoicing process. &nbsp;</p>
	</li>
	<li>
	<p><strong>Good Customer Interaction:</strong> Better interaction with customers can build deeper connections, boosting the probability of repeat business and recommendations. It can also assist organizations in better understanding their customers&#39; payment preferences and issues, allowing them to modify their accounts receivable operations accordingly. &nbsp;</p>
	</li>
	<li>
	<p><strong>Compliance:</strong> Good communication can assist guarantee that legal and regulatory debts for accounts receivable management are met. Businesses, for example, must follow specific protocols when seeking to collect past-due debts, and effective communication can assist avoid infractions and the accompanying fines. &nbsp;</p>
	</li>
</ol>

<p>Improving customer communication is critical for developing an effective accounts receivable management system. Businesses can lower the risk of late accounts and enhance their cash flow by creating openness, establishing partnerships, and encouraging early payments. &nbsp;</p>

<p>&nbsp;</p>

<h3><strong>5) Enables Better Customer Service &amp; Satisfaction&nbsp; &nbsp;</strong></h3>

<p>Most of the time it&#39;s your fault that the customers pay late. Curious to know where you make an error? &nbsp;</p>

<p>There could be a possibility that you didn&#39;t send the invoice early enough for them to pay on time. In addition, it could also be that the invoice was damaged and they won&#39;t pay until it&#39;s fixed. These issues can have a significant impact on customer satisfaction. &nbsp;</p>

<p>However, the pathetic thing is that these issues are preventable ones. But due to manual errors, these issues arise. They are caused by missing or incorrect purchase order information on your invoices. &nbsp;</p>

<p>Also, consider how frustrated your customers will be if you keep calling them for late payments when it&#39;s not their fault they didn&#39;t receive the invoice on time, or if you don&#39;t include proper details in the invoices.&nbsp;&nbsp;</p>

<p>By automating invoice delivery, detecting problems with invoices, such as missing purchase orders, and providing everything you need in one centralized location, an Accounts Receivable Management system enables you to serve your customers better, save more time, and improve your relationship so they&#39;ll buy more from you in the future. &nbsp;</p>

<p>&nbsp;</p>

<h2><strong>Final Thoughts about Enhancing your Accounts Receivable Management System: &nbsp;</strong></h2>

<p>By now you would&#39;ve understood the importance of Accounts Receivable Management. What if you could make it simpler with automation? &nbsp;</p>

<p>Yes! &nbsp;</p>

<p><strong>&quot;One Automation; One Click; Accounts Receivable Management Made Simple By Maxyfi!&quot;. &nbsp;</strong></p>

<p>In simple words, implementing Accounts Receivable Software can maximize your accounts receivable collection efficiency as well as help manage your accounts receivable much more simpler.&nbsp;&nbsp;</p>

<p>Help your Accounts Receivable Management system to save time and resources!&nbsp; &nbsp;</p>

<p>For more tips on how to tackle the challenges in your accounts receivable process, follow our&nbsp;<strong><a href="https://www.maxyfi.com/blog" target="_blank">Maxyfi blogs</a></strong>.&nbsp;</p>


Accounts receivable need proper management to achieve promising results! With automation, it's now easier to manage all your accounts receivable!

Maxyfi | Accounts Receivable Management With Automation

Everything needs proper management to achieve promising results! Likewise your accounts receivable! With automation, it's now easier to manage all your accounts receivable!

Accounts Receivable Management – Made Simple With Automation!

<p><strong>Accounts receivable turnover ratio or Debtor&#39;s turnover ratio</strong> is a key performance indicator to measure your business&#39; efficiency in providing credit and how effectively payments are collected on time. We shall delve deeper into this topic, including how to calculate the turnover ratio and use it for our business/organization.</p>

<ul>
	<li>
	<p><strong>What does Turnover mean in Accounts Receivable?</strong></p>
	</li>
	<li>
	<p><strong>What is Accounts Receivable Turnover Ratio?</strong></p>
	</li>
	<li>
	<p><strong>How to calculate Turnover Ratio with example?</strong></p>
	</li>
	<li>
	<p><strong>How to determine a good turnover ratio?</strong></p>
	</li>
	<li>
	<p><strong>Why is&nbsp;Turnover Ratio important?</strong></p>
	</li>
</ul>

<h2>&nbsp;</h2>

<h2><strong>What does Turnover mean in Accounts Receivable?</strong></h2>

<p>Turnover refers to the total amount of money collected from their sales or how fast they sell their products/goods. For example, when a business sells its inventory in six months and requires new inventory or the total amount of money collected by a business over a certain period for their goods/products.</p>

<p>In <strong><a href="http://www.maxyfi.com">Accounts Receivable</a></strong><a href="http://www.maxyfi.com"><strong>&nbsp;Automation</strong></a>, turnover is the length of time taken to receive the collections offered on credit to customers by a business/organization. It is an important measure as it helps a business understand how quickly they collect their receivables.</p>

<h2>&nbsp;</h2>

<h2><strong>What Is Accounts Receivable Turnover Ratio?</strong></h2>

<p>Accounts Receivable Turnover Ratio is the ratio of average accounts receivable collected during a certain period divided by the net credit sales of the same period.</p>

<p>It is a measure of how efficiently a business collects its due invoices as well as indicates the financial and operational performance of a business. This allows businesses to keep a check on their cash flow growth as well as working capital costs.</p>

<h3>&nbsp;</h3>

<h3><strong>How To Calculate Accounts Receivable Turnover Ratio With Example?</strong></h3>

<p>&nbsp;</p>

<div style="background:#eeeeee; border:1px solid #cccccc; padding:5px 10px"><strong>Accounts Receivable Turnover Ratio = Net Credit Sales */* Average Accounts Receivable</strong></div>

<p>&nbsp;</p>

<p><strong>Net Credit Sales</strong> refer to the total revenue generated by a business on selling products/goods to customers on credit, minus all sales returns and sales allowances.</p>

<p><strong>Net Credit Sales = Sales on credit &ndash; Sales Returns &ndash; Sales Allowances</strong></p>

<p>To calculate <strong>Average Accounts Receivable</strong>, divide the sum of the beginning accounts receivable and the ending accounts receivable by the sum of 2.</p>

<p><strong>Average Accounts Receivable = (Beginning Accounts Receivable) + (Ending Accounts Receivable) */* 2</strong></p>

<p>Let&#39;s look at an example to understand better.</p>

<p>Company ABC has beginning accounts receivable of $180,000, ending accounts receivable of $200,000, and net credit sales of $4,750,000.</p>

<h3><strong>To calculate the turnover ratio :</strong></h3>

<p>Average Accounts Receivable : $180,000 + $200,000 = $380,000 / 2 = $190,000</p>

<p>Accounts Receivable Turnover Ratio : $4,750,000 / $190,000 = 25</p>

<p>Therefore, Company ABC has an accounts receivable turnover ratio of 25.</p>

<h3>&nbsp;</h3>

<h3><strong>How To Determine A Good Turnover Ratio?</strong></h3>

<p>It doesn&#39;t take much to determine a good turnover ratio as it depends on each company&#39;s credit policies and the number of days taken for them to collect their receivables.</p>

<h3><strong>Good Accounts Receivable Turnover Ratio</strong></h3>

<p>A good turnover ratio in Accounts Receivable indicates an efficient collection system, strong credit policies, and/or could be due to a good number of high-quality clients.</p>

<h3>&nbsp;</h3>

<h3><strong>Why Is Turnover Ratio Important For Your Business?</strong></h3>

<ol>
	<li>
	<p>The Accounts receivable turnover ratio can help businesses understand the efficiency of their collections and analyze strategies that work for their business to improve revenue.</p>
	</li>
	<li>
	<p>This will also enable them to strategize and plan for future business investments while staying on top of their cash flow.</p>
	</li>
</ol>

<p>And more tips on how you can improve your business&#39;s turnover ratio, stay tuned to <strong><a href="https://www.maxyfi.com/blog" target="_blank">our blog</a></strong>!</p>

<p>&nbsp;</p>

<p>&nbsp;</p>


Read this guide to accounts receivable turnover ratio and understand your business's collection efficiency and how it can help plan future finances.

Maxyfi | Accounts Receivable Turnover Ratio 

Read this in-depth guide to accounts receivable turnover ratio and understand more about your business's efficiency in collections and how it can help strategize future finances.

Accounts Receivable Turnover Ratio

<p><strong>Meet Mike.</strong></p>

<p>Mike was running a successful business with good cash flows and it was going all well until many of his customers defaulted payments in large numbers something he wasn&#39;t prepared for. Mike had to borrow funds to meet operational expenses which&nbsp;increased the cost of doing business thus putting his business at risk.</p>

<p>What could have caused the <strong><a href="https://www.maxyfi.com/lp/accounts-receivable-software">accounts receivable</a></strong> challenges for Mike?&nbsp;Let&#39;s do a case study.</p>

<p>&nbsp;</p>

<h2><strong>Weak Enforcement</strong></h2>

<p><em>&quot;Mike wasn&#39;t enforcing his customers to pay within the payments terms and was ok with delayed payment&quot;.</em></p>

<p>Most businesses offer&nbsp;services on a credit basis where an invoice is raised on a specific milestone and customers pay these invoices on agreed timelines. Businesses and customers will typically have mutually agreed to timelines to make the payment also called <strong>Net D</strong>.</p>

<p>For example, Net 30 indicates that the net invoice amount is expected to be paid in full within 30 days of the Invoice Issue date. Net 10, Net 15, Net 30, and Net 60 are some of the common payment terms in practice.</p>

<div style="background:#eeeeee; border:1px solid #cccccc; padding:5px 10px"><strong>What You Can Do?</strong></div>

<div style="background:#eeeeee; border:1px solid #cccccc; padding:5px 10px"><strong>Review and agree on comfortable payment terms that meet customers&#39; payment cycle. Enforcing payment terms that don&#39;t meet customers&#39; business models will result in delays. Identify customer payment challenges and design strategies to enforce adherence to the payment terms.</strong></div>

<p>&nbsp;</p>

<h2><strong>Lack of Monitoring</strong></h2>

<p><em>&quot;Mike wasn&#39;t monitoring cash flows and related statistics, He wasn&#39;t noticing that his month-on-month Days&nbsp;Sales Outstanding (DSO)&nbsp;kept increasing.&quot;</em></p>

<p>Many businesses miss the insights from the account receivable data that provides early warning signals. Some of these insights can provide views on business-level cash flows while others can also be derived at the individual customer level.</p>

<p><strong>Below are some of the metrics that need to be monitored, and measured to ensure corrective actions can be taken upfront</strong>.</p>

<ul>
	<li><a href="https://www.maxyfi.com/blog/days-sales-outstanding" target="_blank"><strong>Days Sales Outstanding(DSO)</strong></a></li>
</ul>

<p>DSO is about how quickly money is collected after an invoice is issued. A healthy DSO does not exceed your terms by half for example if the payment term is Net 30, then a healthy DSO is 45 Days</p>

<div style="background:#eeeeee; border:1px solid #cccccc; padding:5px 10px"><strong>How To Calculate DSO :</strong></div>

<div style="background:#eeeeee; border:1px solid #cccccc; padding:5px 10px">(average accounts receivable &divide; billed sales) x number of days</div>

<p>&nbsp;</p>

<ul>
	<li><strong>Best Possible DSO</strong></li>
</ul>

<p>Best Possible DSO considers only current accounts receivable and not past data. It indicates what your on-time payment turnaround is going to be.</p>

<div style="background:#eeeeee; border:1px solid #cccccc; padding:5px 10px"><strong>How To Calculate the Best Possible DSO :</strong></div>

<div style="background:#eeeeee; border:1px solid #cccccc; padding:5px 10px">(current accounts receivable &divide; billed sales) x number of days</div>

<p>&nbsp;</p>

<ul>
	<li><strong>Average Days Delinquent</strong></li>
</ul>

<p>Average Days Delinquent (ADD) is a metric that lets companies know the average number of days those late payments take to get collected. The lower your ADD score, the better.</p>

<div style="background:#eeeeee; border:1px solid #cccccc; padding:5px 10px"><strong>How To Calculate Average Days Delinquent :</strong></div>

<div style="background:#eeeeee; border:1px solid #cccccc; padding:5px 10px">DSO &ndash; Best Possible DSO</div>

<p>&nbsp;</p>

<ul>
	<li><strong>Turnover Ratio</strong></li>
</ul>

<p>Your accounts receivables turnover ratio or Debtor turnover ratio shows how well you manage the credit you extend to your clients and how efficient you are at collecting payments. The higher the ratio the better.</p>

<div style="background:#eeeeee; border:1px solid #cccccc; padding:5px 10px"><strong>How To Calculate Turnover Ratio :</strong></div>

<div style="background:#eeeeee; border:1px solid #cccccc; padding:5px 10px">Total sales for the period &divide; ((receivables at the beginning of the period + receivables at the end of the period) &divide; 2)</div>

<p>&nbsp;</p>

<ul>
	<li><strong>Collection Effectiveness Index(CEI)</strong></li>
</ul>

<p>CEI helps to understand how strong your accounts receivable management is. The closer the CEI is to 100%, the better your processes.</p>

<div style="background:#eeeeee; border:1px solid #cccccc; padding:5px 10px"><strong>How To Calculate Collection Effectiveness Index :</strong></div>

<div style="background:#eeeeee; border:1px solid #cccccc; padding:5px 10px">(beginning receivables + monthly credit sales &ndash; ending total receivables) &divide; (beginning receivables + monthly credit sales &ndash; ending current receivables) x 100</div>

<p>&nbsp;</p>

<h2><strong>Ineffective Communication strategy</strong></h2>

<p><em>&quot;Mike was following up with the point of contact from customers on an ad-hoc basis and more of informal reminder, he was using offline follow-up techniques like emails&quot;</em></p>

<p>Following an ineffective communication strategy and doing informal communication will give the customers the view that the receiving organization is fine&nbsp;with delays.&nbsp;Moreover,&nbsp;most of the time the follow-up happens with the same person and doesn&#39;t follow the escalation route when the same doesn&#39;t give the expected outcome.</p>

<div style="background:#eeeeee; border:1px solid #cccccc; padding:5px 10px"><strong>What You Can Do?</strong></div>

<div style="background:#eeeeee; border:1px solid #cccccc; padding:5px 10px"><strong>Adapt&nbsp;a suitable dunning process where communications progress from gentle reminders to effective&nbsp;letters and phone calls, emphasizing the need to make payments on time.</strong></div>

<p>&nbsp;</p>

<h2><strong>Poor and Decentralized AR Management</strong></h2>

<p><em>&quot;Mike had a team of 3 people working on the&nbsp;<a href="http://www.maxyfi.com/lp/accounts-receivable-software"><strong>accounts receivable process</strong></a>&nbsp;and each of them was capturing AR information locally. There was&nbsp;no single place to audit the conversation, commitments, and next planned actions. The same became a&nbsp;people-centric process.&quot;</em></p>

<p>Businesses lose control of account receivables if they are not able to track them centrally or&nbsp;audit the communications happening with the customers. Typically businesses&nbsp;follow up via several mediums like emails, letters, calls, and SMS. The follow-up information is split across several devices and calls are not recorded/transcribed thus making it difficult to audit or use&nbsp;as evidence for any legal proceedings.</p>

<div style="background:#eeeeee; border:1px solid #cccccc; padding:5px 10px"><strong>What You Can Do?</strong></div>

<div style="background:#eeeeee; border:1px solid #cccccc; padding:5px 10px"><strong>Adopting a centralized accounts receivable&nbsp;system is key for any business to get a view of the overall status of account receivables plus monitor follow-up status. Centrally recording the follow-up helps audit as well as removes people&#39;s dependency and enables the user to understand the background of conversations to help lead better the next conversation.</strong></div>

<p>&nbsp;</p>

<h2><strong>Irregular Promise Tracking</strong></h2>

<p><em>&quot;Mike was not driving the customers to provide a Promise date for making payments and not tracking closely whether the customer had made the payments as per the promise&quot;</em></p>

<p>One of the common mistakes that a business makes&nbsp;is that they don&#39;t drive the conversation with customers to provide a promised date by which the payments will be made. More damage happens when there is no follow-up or tracking to check whether the customer kept the promise by making the payment.</p>

<div style="background:#eeeeee; border:1px solid #cccccc; padding:5px 10px"><strong>What You Can Do?</strong></div>

<div style="background:#eeeeee; border:1px solid #cccccc; padding:5px 10px"><strong>Equip a &quot;Promise To Pay&quot; feature&nbsp;in the dunning&nbsp;process and the same has to be recorded formally via email/letter&nbsp;to customers. Send reminders before the promised date and perform a more rigorous strategy in case the customer&nbsp;doesn&#39;t&nbsp;keep the promise.</strong></div>

<p>&nbsp;</p>

<h2><strong>Lack of Payment Options and Incentives</strong></h2>

<p><em>&quot;Mike had provided bank deposits as the only means of payment and that became challenging, especially during lockdowns. He didn&#39;t offer any incentives or discounts as well for on-time payments&quot;</em></p>

<p>Customers have their own preferred payment channels, and enforcing limited payment options will have a negative impact on their payments. Also, customers typically tend to pay towards the end of payment terms as they can hold liquidity till that time and there is no benefit to making early payments.</p>

<div style="background:#eeeeee; border:1px solid #cccccc; padding:5px 10px"><strong>What You Can Do?</strong></div>

<div style="background:#eeeeee; border:1px solid #cccccc; padding:5px 10px"><strong>Offer multiple payment options and you are more likely to get paid faster. Offering incentives also encourage customers to pay early like offering 2/10 Net 30 which states that a discount of 2% is applicable if paid within 10 days for 30 days payment term.</strong></div>

<p>&nbsp;</p>

<h2><strong>Time-consuming&nbsp;Interactions</strong></h2>

<p><em>&quot;Mike&#39;s customers have several Invoices/bills to be paid, and the same is shared via emails and letters. Customers typically respond to queries or requests via email most of the time and that can be quite time-consuming&quot;</em></p>

<p>Interactions in the accounts receivable process typically occur through emails and letters which are discrete by nature. Customers need to refer to multiple email threads or physical letters to get details of their overdue. This can be tedious as well and the same goes for&nbsp;responding to these emails as well.</p>

<div style="background:#eeeeee; border:1px solid #cccccc; padding:5px 10px"><strong>What You Can Do?</strong></div>

<div style="background:#eeeeee; border:1px solid #cccccc; padding:5px 10px"><strong>Provide&nbsp;customers with one consolidated view of overall outstanding dues with various embedded options such as digital payment options, messaging options, promise request features, etc. Digital interactions via the Customer&nbsp;Portal can bring transparency as well as a seamless one-stop for all overdue queries and actions.</strong></div>

<p>&nbsp;</p>

<h2><strong>Accounts Receivable Disputes Negligence</strong></h2>

<p><em>&quot;Some of Mike&#39;s customers had raised disputes on incorrect Invoices and also on the quality of services rendered&nbsp;and he wasn&#39;t able to handle them properly.&quot;</em></p>

<p>Customers typically will hold the payments till the disputes are resolved or corrected. Disputes can also worsen the relationship with the customers, bringing in friction and making it much more difficult to collect payments leading to bad debts or credit risks.</p>

<div style="background:#eeeeee; border:1px solid #cccccc; padding:5px 10px"><strong>What You Can Do?</strong></div>

<div style="background:#eeeeee; border:1px solid #cccccc; padding:5px 10px"><strong>Track disputes effectively and reviews the process to address billing/payment&nbsp;or service concerns thereby paving the way for better customer experience and faster payments.</strong></div>

<p>&nbsp;</p>

<h2><strong>Lack of Credit Scoring</strong></h2>

<p><em>&quot;Mike was providing services to customers irrespective of the repeated payment delays, with increased AR delinquency levels.&quot;</em></p>

<p>Customers belonging&nbsp;to various industry sectors have different levels of risks involved, for example,&nbsp;the Logistics and Hospitality sector impact due to the pandemic, etc. Lack of credit scoring at the customer level will increase exposure to bad debt and put businesses at a bigger risk.</p>

<div style="background:#eeeeee; border:1px solid #cccccc; padding:5px 10px"><strong>What You Can Do?</strong></div>

<div style="background:#eeeeee; border:1px solid #cccccc; padding:5px 10px"><strong>An effective accounts receivable&nbsp;software should score the customers based on&nbsp;the sector,&nbsp;behavioral, environmental, and other relevant factors. A customer with a bad credit score or risk profile needs a review of the payment cum credit terms.</strong></div>

<p>&nbsp;</p>

<h2><strong>Accounting Challenges</strong></h2>

<p><em>&quot;Mike was not updating the payments received in the banking books against the accounts receivable&nbsp;process on a regular basis.&quot;</em></p>

<p>The lack of a real-time payment interface and reconciliation with the accounts receivable&nbsp;process will cause an incorrect dunning process, resulting in an unpleasant experience for customers.</p>

<div style="background:#eeeeee; border:1px solid #cccccc; padding:5px 10px"><strong>What You Can Do?</strong></div>

<div style="background:#eeeeee; border:1px solid #cccccc; padding:5px 10px"><strong>Offer a digital payment and&nbsp;reconciliation process that updates the due amount in real-time at the customer cum invoice level. This reduces manual reconciliation errors and helps the accounts receivable automation&nbsp;process.</strong></div>

<p>&nbsp;</p>

<p>Tackling all these challenges can get overwhelming and tedious for anyone, that&#39;s why it&#39;s best to invest in&nbsp;<strong><a href="https://www.maxyfi.com/lp/accounts-receivable-automation-software" target="_blank">accounts receivable automation</a></strong> software&nbsp;for your business.</p>

<p>Start automating your accounts receivable process right away with our <strong>Accounts Receivable Automation Software - Maxyfi</strong>, and watch your business thrive!</p>

<p>For more tips on how to tackle the challenges in your accounts receivable process, follow our <strong><a href="https://www.maxyfi.com/blog" target="_blank">Maxyfi blogs</a>.</strong></p>

<p>&nbsp;</p>

<p>&nbsp;</p>


Tackling accounts receivable challenges in your business can get tedious and nerve-racking for anyone. Here are the solutions to avoid them in the future. 

Accounts Receivable Challenges Of Every Business

Tackling accounts receivable challenges in your business can get tedious and nerve-wrecking for anyone. Here's a case study on Mike's challenges with accounts receivable and solutions to avoid them in the future. 

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