But if this mix changes over time, it will. If you have more cash sales, for example, an inaccurate DSO calculation might not have as big of a negative impact. This means they skew the days sales outstanding calculation when mixed with credit sales.ĭifferent companies also have different mixes of cash and credit sales revenue. Cash sales should not be.Ĭash sales essentially have a DSO of 0 because customers pay immediately. Only credit sales revenue should be included in your DSO calculation. Don’t include cash sales in the accounts receivable balance So, this company’s DSO is 50.5 days, i.e., it takes 50.5 days for it to convert its average accounts receivable into cash. So, calculating their DSO value should look like this: Example DSO calculation:Ī company’s total receivables for the first quarter (91 days) were 10,000 USD, and its total credit sales were 18,000 USD. And annually enables comparisons with other years. Quarterly is useful for comparing your company’s performance throughout the year and for the same period in different years. It can be measured monthly, though for some businesses this may be too short of a period to gain real insights. Which time period you choose for the final part of the equation (the ‘number of days in a given period’) is important. ![]() ![]()
0 Comments
Leave a Reply. |
AuthorWrite something about yourself. No need to be fancy, just an overview. ArchivesCategories |