Turning your accounts receivable into cash is a super important part of converting your sales/revenues into cash. Making a sale, but never collecting the cash from that sale, is the fast track to a cash flow crisis.
One of the first key performance measures (KPI) I look at for a company is their DSO. It’s the average number of days of sales that are sitting (and sometimes stuck) in accounts receivable.
It’s a great measure of how well you are collecting your receivables. And I always look at it over a period of time because it reveals the trend in your DSO.
Here are a couple charts from a company I did this for. I have marked the chart so you can see what it revealed.
But the focus slipped.
Once management saw the chart they knew instantly what had happened.
SurvivalWare is the financial analysis software I use to analyze financial results (as well as graphing, financial projections, cash flow projections and the Monthly Confidence Package).
Take a look at your DSO today to see what it reveals about how well you are collecting your accounts receivable.
Turning your receivables into cash is critical to your financial success.
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