What Is a Good Accounts Receivable Turnover Ratio for Food & Beverage?
Accounts receivable turnover rates can provide you with a strong indication of how well your company is doing in the food and beverage distribution industry. Accounts receivable is the accounting term that refers specifically to the money owed to you by the vendors who rely upon you for their food service needs. Restaurants, hotels and even grocery stores rely upon short-term credit to purchase their supplies. The short-term debt they incur generally has to be paid back in 60 days or fewer. The turnover ratio in accounts receivable will tell you how often suppliers are moving their food products.
A calculation of the accounts receivable turnover ratio provides an indication of how many times a company turns over its inventory in the course of one year. If a company has a turnover ratio of 5 to 1, this means that it turns over its inventory about five times each year. This figure is calculated by simply taking your company's net credit sales and dividing that figure by the average accounts receivable inventory value. A turnover ratio of 5 to 1 is the same as a turnover rate of 5.0.
Generally speaking, the higher the turnover ratio for a company in the food and beverage industry, the better. A accounts receivable turnover ratio means that the food and beverages being purchased are moving quickly, causing the purchaser to come back to the supplier for more supplies. A low accounts receivable turnover ratio means that companies have too much inventory on hand and are having a hard time selling the products they're purchasing from you.
The range of turnover ratios in accounts receivable for the food and beverage industry vary from as low as about 1 to 1 to as high as 20.79 to 1, according to Y Charts. Y Charts lists the accounts receivable inventory turnover ratios for 16 of the top food and beverage companies. In December 2011, Coca-Cola FEMSA (Coca-Cola's bottling subsidiary) topped the list with a 20.79 rating, while Coca-Cola Enterprises had a rating of 4.93. Embotelladora Andina, Reeds, National Beverage and the Hansen Natural Corporation all had turnover rates in excess of 11.0.
Food industry ratios differ little from the beverage industry ratios for accounts receivable turnover. At the bottom of a list of nine companies listed by Y Charts was G. Willi--Food International, with a turnover ratio of 4.05 to 1. Topping the list was Zhongpin with a 19.05 to 1 ratio. Kraft Foods had an accounts receivable turnover ratio of 8.01 to 1, as of 2011, while H.J. Heinz & Company had a turnover ratio of 10.30 to 1.