Days sales outstanding is not a good metric for measuring collections performance, experts say.
Alix Stuart, CFO.com | US
July 27, 2011
The first phrase in the bottom line of the equation should read "Beginning Receivables" rather than "Ending Receivables." The graphic should be fixed soon. Thanks to an alert reader for pointing this out!
Posted by Alix Stuart | August 10, 2011 10:40 am
The article highlights succinctly the strengths and weaknesses of the DSO metric since overdue balances are often subsidized by good payers. There is one correction on the formula you published as both the numerator and denominator are almost exactly the same except for the total vs current A/R. Therefore: ((Beg A/R+(Credit Sales/N)-Ending A/R) / (Beg A/R + (Credit Sales/N) - Ending Current A/R) ) X 100
Posted by Antonio Morales | July 28, 2011 10:07 am© CFO Publishing Corporation 2009. All rights reserved.