Collection ratios: keys to managing your business finances

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As part of efficient accounts receivable management, you should take into account your collection ratios . These are financial indicators that allow you to know how efficient this process is in your business.

To know your collection ratios you need to take into account different indicators whose values ​​are obtained from the application of specific formulas, although you could also have this information, more quickly and accurately, if you implement collection software .

In this Moonflow post we tell you more about collection ratios.

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What will you find in this text?

Importance of collection ratios

Types of collection ratios

1. Liquidity ratios

2. Management ratios

How can accounts receivable software help me with my collection ratios?

Importance of collection ratios
We've given you the definition of collection ratios above. But buy uae email database are they important? Because they allow you to know how quickly you get your accounts receivable paid and have the cash you need to cover your corporate expenses: paying suppliers, employees, services, etc.

If you are not clear about your collection ratios, you cannot know if you need to make adjustments or improvements to improve collection. A clear understanding of your collection status will allow you to make strategic decisions that contribute to the maintenance and growth of your company.

Types of collection ratios
As we have mentioned before, collection ratios comprise a series of indicators that are related to the collection management of a company. In this sense, if we have to list the types of collection ratios, we find the following:

1. Liquidity ratios
Among these is the Average Collection Period (ACP), which allows a company to know how long it takes to collect on an invoice from its issuance. The ACP formula is as follows:

PPC = (accounts receivable x days of the year) / annual sales in current account

Where:
Accounts Receivable: The total of accounts receivable.
Days of the year: Normally 360 days are used to simplify calculations.
Annual current account sales: Sales made on credit during the year.