In the U.S. we call it “accounts receivable”, in the UK and most of Europe they call it “cash turnover”.
I like their term better than our term because to me it is more descriptive of the impact of letting money owed become overdue.
In the U.S. we say our accounts receivable average is 90 days when our customers or clients on average are overdue with payment 90 days.
In the UK and Europe they say our cash turnover is 4.
In your first year in business, if you bill $20,000 a month you would collect 4 times $20,000 or $80,000. (What happens in subsequent years is a subject for other blogs.)
In the U.S. we say our accounts receivable average is current when our customers or clients have all paid on time and in full.
In the UK and Europe they say our cash turnover is 12.
In your first year in business, if you bill $20,000 a month you would collect 12 times $20,000 or $240,000.
And this is why I like the UK and European words “cash turnover” better than “accounts receivable” it actually describes the impact of allowing bills to go unpaid for a certain length of time. I believe the words lead to better business practices. (Also the subject of another blog).
