Acceptable cash to credit ratio?

[Hannes Botha]

The Accounts receivable turnover ratio, I don't think will be effective. Reason being, some debtors pay on the 25th, whereby others are still outstanding, some pay on the last day of the month, whereby the debtor that paid on the 25th started buying again, and some are still outstanding and some pay on the 7th, whereby for the customer that paid on the 25th already have half a month of buying behind him. Maybe I'm wrong, not a financial buff, but neither are my partners.

Customer days: Most pay 30 days (big accounts, R30k to R70k), one pay 45 days (very big, about a R100k), very few customers over 90 days, but they are small accounts (R6000) then we have a couple of guys who are struggling to pay, so we are getting R500 a month on a R4500 account.

[prettypegagirl]

The Accounts receivable turnover ratio, I don't think will be effective. Reason being, some debtors pay on the 25th, whereby others are still outstanding, some pay on the last day of the month, whereby the debtor that paid on the 25th started buying again, and some are still outstanding and some pay on the 7th, whereby for the customer that paid on the 25th already have half a month of buying behind him. Maybe I'm wrong, not a financial buff, but neither are my partners.

Customer days: Most pay 30 days (big accounts, R30k to R70k), one pay 45 days (very big, about a R100k), very few customers over 90 days, but they are small accounts (R6000) then we have a couple of guys who are struggling to pay, so we are getting R500 a month on a R4500 account.

I think you should still try it...

Definition of "Receivables Turnover Ratio"

By maintaining accounts receivable, firms are indirectly extending interest-free loans to their clients. A high ratio implies either that a company operates on a cash basis or that its extension of credit and collection of accounts receivable is efficient.

A low ratio implies the company should re-assess its credit policies in order to ensure the timely collection of imparted credit that is not earning interest for the firm. - I think this is exactly what you're trying to find out?

To better manage the debtors offer them discount for paying earlier, the moment a big company gets discount they will pay earlier

[Hannes Botha]

To better manage the debtors offer them discount for paying earlier, the moment a big company gets discount they will pay earlier

The big companies aren't a problem, they pay on time. It's the smaller guys and government...