The companies you support are growing, which is a great thing. But as you watch their revenue grow, you'll want to watch to see whether your Accounts Receivable Days are growing, too, because that can be a sign the cash they need to keep the lights on is stuck in somebody else's pockets, leaving your clients short and unable to pay expenses.
- KPI: AR Days
- DEFINITION: Accounts Receivable Days is a measure of how quickly your clients collect cash from their customers
- FORMULA: AR Days = Accounts Receivable / (Total Revenue / 365 days)
- SIGNIFICANCE: Cash keeps the lights on. If your clients aren't collecting it from their customers as quickly as they need to, they might run into problems.
- RECOMMENDATION: If your client's AR Days are too high, encourage them to consider more aggressive collection policies, or to change their terms to incentivize faster payments.
Peerview Data provides comparative analytics and benchmarking solutions to accounting firms, enabling them to turn client data into actionable insights, get back in front of clients, and grow consulting revenue.
For more information on the value of measuring financial ratios, read here.