Accounts Receivable Turnover Ratio: Formula, DSO, and What 6 Real Service Companies Score
The accounts receivable turnover ratio is net credit sales divided by average receivables; 365 divided by it is DSO. As of October 2026, six public service companies' 2025 10-Ks put DSO between 19 days (pest control) and 89 (commercial contracting), and a $1.8M business at 49 days has about $4,930 tied up per day.
What is the accounts receivable turnover ratio?
The accounts receivable turnover ratio is net credit sales divided by average accounts receivable. It tells you how many times a year you collect your average unpaid balance. Divide 365 by it and you get days sales outstanding (DSO), the average number of days an invoice waits to be paid. A business with $1.8 million in credit sales and $240,000 in average receivables turns them 7.5 times a year, or once every 49 days. On net 30 terms, that means the average customer pays about 19 days late.
The formula is in every accounting textbook. What the textbooks skip is what a real number looks like, so we worked it out from six public service companies' 2025 annual reports (10-Ks) filed with the SEC. Their DSO runs from 19 days to 89. Every company figure on this page is arithmetic on numbers those companies reported, read from the SEC's EDGAR data on October 2, 2026. The sources are listed at the end.
The accounts receivable turnover formula
Two formulas, and they are the same number seen from two sides:
- AR turnover = net credit sales / average accounts receivable
- Average accounts receivable = (receivables at the start of the period + receivables at the end) / 2
- Days sales outstanding (DSO) = 365 / AR turnover, or average receivables / net credit sales x 365
"Net credit sales" means sales you invoiced and waited for, minus returns and credits. Sales paid by card or cash on the spot never become receivables, so they do not belong in the formula. If your books do not split them out, total revenue works as a stand-in, with one catch: the more customers who pay at the time of service, the faster your ratio looks compared with how your invoiced accounts actually pay.
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How to calculate AR turnover: a worked example
Take a commercial HVAC service company that invoices most of its work on net 30:
| Line | Number |
|---|---|
| Net credit sales for the year | $1,800,000 |
| Accounts receivable on January 1 | $210,000 |
| Accounts receivable on December 31 | $270,000 |
| Average accounts receivable | $240,000 |
| AR turnover ($1,800,000 / $240,000) | 7.5 |
| DSO (365 / 7.5) | 48.7 days |
| One day of credit sales ($1,800,000 / 365) | About $4,930 |
The last line is the one to remember. Every day of DSO is about $4,930 of this company's own money sitting in customers' bank accounts. If it brought DSO from 48.7 days down to 35, it would free up about $67,600 in cash without selling one more job. That is the real reason to track the ratio: it turns "customers pay slowly" into a dollar figure you can weigh against what it costs to fix.
What is a good accounts receivable turnover ratio?
A good ratio is one whose DSO sits close to your payment terms. There is no single target across industries, because terms differ. A useful way to read your own number:
| AR turnover | DSO | On net 30 terms, it means |
|---|---|---|
| 12 or higher | About 30 days or less | Customers pay on time, or many pay at the time of service |
| 9 | About 41 days | The average invoice is about 11 days late |
| 7.5 | About 49 days | About 19 days late, which is common and fixable |
| 6 | About 61 days | A month late on average; your terms are not being followed |
| 4 | About 91 days | Either very long contract terms or a collections problem |
The same turnover means different things on different terms. A turnover of 6 is a problem on net 30 and on schedule on net 60. Check what you actually agreed to first; our guide to net 30 payment terms covers how net 10th, EOM and 2/10 net 30 change the due date and the cash you are owed at any moment.
AR turnover for six real service companies (2025 10-Ks)
To give the ratio a sense of scale, we calculated it for six US public companies that sell services or supplies to the kinds of businesses we work with: pest control, HVAC distribution, staffing, landscaping, facility services and commercial mechanical contracting. Each uses the company's fiscal 2025 revenue and its receivables at the start and end of that year, as reported in its 10-K.
| Company (fiscal year end) | Business | Revenue | Average receivables | AR turnover | DSO |
|---|---|---|---|---|---|
| Rollins (Dec 31, 2025) | Pest control | $3.76B | $199.3M | 18.9 | 19 days |
| Watsco (Dec 31, 2025) | HVAC equipment distribution | $7.24B | $837.1M | 8.6 | 42 days |
| Robert Half (Dec 31, 2025) | Staffing and consulting | $5.38B | $760.4M | 7.1 | 52 days |
| BrightView (Sep 30, 2025) | Commercial landscaping | $2.67B | $404.2M | 6.6 | 55 days |
| ABM Industries (Oct 31, 2025) | Facility services, janitorial | $8.75B | $1.43B | 6.1 | 60 days |
| Comfort Systems USA (Dec 31, 2025) | Commercial mechanical and electrical contracting | $9.10B | $2.22B | 4.1 | 89 days |
Three things stand out:
- Who pays matters more than the industry label. Rollins, the parent of Orkin, sells recurring pest control to homes and businesses and turns its receivables almost 19 times a year. BrightView and ABM bill property managers and facility owners under service contracts and wait close to two months. A home-service business and a commercial service business can do the same work and have DSOs a month apart.
- Retainage drags contractors down. Comfort Systems' billed receivables of $2.58 billion at the end of 2025 included $506.5 million of retainage: money the customer holds back until a project is finished. Take retainage out and its DSO drops from 89 days to about 72. If you are a subcontractor, track your ratio with and without retainage, or you will chase money that is not due yet.
- Even the slowest pay on a schedule. These are large companies with full collections teams, and the middle two of the six sit at 52 and 55 days. A small business on net 30 sitting at 60 or 70 days is not unlucky; its invoices and follow-up are slower than its terms.
Two caveats on the table. Public filers do not report credit sales separately, so we used total revenue, which flatters any company with many card or prepaid payments. And ABM reports "accounts and other receivables" as one line, so its figure includes some non-trade receivables. The comparison is a sense of scale, not a benchmark to grade yourself against.
Why your annual AR turnover can mislead you
The annual formula averages only two days: the first and last of the year. For a seasonal business, those two days can be the quietest of the year. An HVAC contractor whose receivables peak in August and bottom out in January will look better on a January-to-January average than it ever felt in summer.
The fix is to compute DSO monthly on a trailing window: receivables at month end / credit sales of the last 90 days x 90. If the number climbs three months in a row, something changed: a big customer slowed down, invoices are going out late, or reminders stopped. A dashboard that recomputes it on the first of every month from your accounting data catches that in weeks, not at year end; automated financial reporting explains how that pipeline pulls AR aging from QuickBooks or Xero without anyone exporting a spreadsheet.
How to improve your accounts receivable turnover
Most of the days in a slow DSO are not customers refusing to pay. They are gaps in the process, and each one can be measured:
- Invoice the day the work is done. The clock starts on the invoice date, so every day an invoice waits to go out is a day added to DSO.
- Send reminders on a schedule, not on memory: before the due date, on it, and a week after.
- Take faster payment rails. A mailed check adds mail time plus the bank's hold before the money is usable; how long a check takes to clear lays out the hold rules. A payment link on the invoice for card or ACH removes most of that.
- Take deposits on new work, so terms apply only to the balance.
- Match payments to invoices the day they land. Unapplied cash shows up as unpaid receivables and sends reminders to customers who already paid.
The first, second and last of those are where automation pays. Our guide to accounts receivable automation breaks down what each piece costs, from reminder sequences you can switch on in your invoicing tool to AI that reads remittance emails and applies the cash.
Turn the ratio into a number you see every month
AR turnover is only useful if someone looks at it before cash gets tight. SuperDupr's AI dashboards pull receivables, credit sales and aging straight from your accounting system, recompute DSO every month, and flag the customers pushing it up, so the conversation about a late payer starts at day 35 instead of day 90.
Sources
- Rollins, Inc., Form 10-K for fiscal 2025 (filed February 12, 2026; accession 0000084839-26-000008) and fiscal 2024 (filed February 13, 2025): revenue and accounts receivable, net, via SEC EDGAR XBRL company facts, read October 2, 2026.
- Watsco, Inc., Form 10-K for fiscal 2025 (filed February 27, 2026; accession 0001193125-26-082486) and fiscal 2024: revenues and accounts receivable, net, via SEC EDGAR, read October 2, 2026.
- Robert Half Inc., Form 10-K for fiscal 2025 (filed February 13, 2026; accession 0000315213-26-000006) and fiscal 2024: revenue and accounts receivable, net, via SEC EDGAR, read October 2, 2026.
- BrightView Holdings, Inc., Form 10-K for fiscal 2025 (filed November 19, 2025; accession 0001193125-25-288109) and fiscal 2024: revenue and accounts receivable, net, via SEC EDGAR, read October 2, 2026.
- ABM Industries Incorporated, Form 10-K for fiscal 2025 (filed December 19, 2025; accession 0000771497-25-000031) and fiscal 2024: revenue and accounts and other receivables, net, via SEC EDGAR, read October 2, 2026.
- Comfort Systems USA, Inc., Form 10-K for fiscal 2025 (filed February 19, 2026; accession 0001104659-26-017530) and fiscal 2024: revenues, billed contract receivables and retainage, via SEC EDGAR, read October 2, 2026.
Frequently Asked Questions
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Divide net credit sales for the period by average accounts receivable, where average receivables is the starting balance plus the ending balance, divided by 2. A business with $1,800,000 in credit sales and receivables of $210,000 at the start of the year and $270,000 at the end has average receivables of $240,000 and a turnover of 7.5.
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They are the same measurement in different units. AR turnover counts how many times a year you collect your average receivables; days sales outstanding (DSO) is 365 divided by that turnover, the average number of days an invoice waits to be paid. A turnover of 7.5 is a DSO of about 49 days.
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One whose DSO sits close to your payment terms. On net 30, a turnover near 12 (about 30 days) means customers pay on time, and 7.5 (about 49 days) means the average invoice is about 19 days late. In the fiscal 2025 10-Ks of six public service companies, turnover ranged from 4.1 for a commercial mechanical contractor to 18.9 for a pest control company.
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Yes, if your books do not separate them, but know what it does to the number. Sales paid by card or cash at the time of service never become receivables, so including them makes your turnover look higher and your DSO shorter than your invoiced customers really pay. If most of your revenue is invoiced, the difference is small.
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Usually, because it means cash arrives sooner. The exception is a ratio pushed up by terms so strict that customers who expect net 30 go elsewhere. The goal is a DSO close to the terms you offer, collected without losing the accounts that need terms.
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Monthly. The annual formula averages only the first and last day of the year, which hides seasonal swings. A trailing version, receivables at month end divided by the last 90 days of credit sales, times 90, shows DSO every month and catches a slowing customer or late invoicing within weeks.