One of the best ways you can gauge the performance of your accounts receivable management strategies is by calculating your accounts receivable turnover (ART) ratio. ART helps measure and describe the efficiency of a company in collecting their credit sales. The accounts receivable turnover ratio is a good indicator of whether or not your credit and collections processes and terms are benefiting for your company. Generally a high value is an indication that your accounts receivable management strategies are working, a low value may indicate inefficiencies in your collections. Different industries have different average ratios, so be sure you are comparing yours against other companies in your industry to see how you measure up. There are a few things you can do to improve your ART including the following: Continue reading
While days sales outstanding and average days delinquent are critical to measuring the health of your credit collections efforts, there are other accounts receivable metrics which are just as important that many companies overlook, customer interaction metrics.
Think about it this way, you track customer movements through marketing and sales with detailed accounts of every communication or interaction you have with them, but then once the sale is made all of that detailed documentation stops. What about accounts receivable? How do you know your customers are happy or that your collectors are communicating with them enough? Continue reading
A recent blog we discussed Days sales outstanding (DSO), a common calculation used to determine the health of a company’s accounts receivable. In that blog it was pointed out that that DSO, while it is an important metric, it alone is not an accurate representation of your accounts receivable success or failure. DSO should never be the end-all be-all of a company’s A/R checkup. Other accounts receivable metrics and trends should be analyzed along with DSO, including average days delinquent (ADD) the topic of today’s article. Continue reading
Days Sales Outstanding (DSO) is a widely used method to help evaluate how effective a company is at collecting receivables. This metric used to measure the average number of days it takes a company to collect what is owed to them after a sale has been completed. Put in fewer words, it is the average collection period. There is much to know about measuring and interpreting DSO, and we have a few words of caution as well when analyzing DSO. Continue reading