Financial Glossary
Accounts Receivable-to-Sales Ratio
The accounts receivable-to-sales ratio divides a company's accounts receivable by its net sales over a period, often expressed as a percentage. It measures how much of a company's revenue is still owed by customers rather than collected in cash. A rising ratio can signal slower collections or looser credit terms, while a lower ratio suggests faster conversion of sales into cash.
Problem & Application
For service businesses, hospitality operators, and B2B companies that invoice rather than collect at point of sale, this ratio is an early warning on cash flow health. If receivables grow faster than sales, the business is effectively financing its customers and may face a cash crunch even while reporting strong revenue. Pairing this ratio with days sales outstanding gives owners a clearer picture of collection efficiency.
In Short
The accounts receivable-to-sales ratio links revenue growth to actual collectibility, making it a practical gauge of whether sales are translating into usable cash.