Government = Nothing you can really do about it, They have 30, 60 or 90 days after invoice received date to pay depending on contract
Small guys - Do not offer them Credit, rather accept something like RCS Cards, at least you will get the money quickly and the risk is with RCS not you. Might be worth it to look into some type of Credit Risk Insurance
Okay so...Receivables turnover ratio=Net receivable sales (Sales on account)/Average net receivables.
In this ratio what is average net receivables?
Average receivables is calculated by adding the beginning and ending receivables for the year and dividing by two
If the ratio is 1.38?
Net receivable sales....anually?
Then you should seriously consider lowering your debtors account or give them incentives to pay you quicker. That basically means that it takes 264 days to turn over your accounts receivables. A good average to start would be between 5 and 8. Your slow paying debtors are going to kill your business.
Do you have an accountant? Speak to him or her to try and find a solution for this.
The Net receivables sales figure, is that for the year.?
Yes for the year
Aaaahh. Might look better then...
Okay...So revised to use annual account sales devided by average receivables for the period, returns a ratio of 15.2. IS this good or not so good?
You see even looking at the averages I noticed our debtors book at the beginning of the period was on about R590k and at the end of the period on R817k.
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