DSO

A measure of the average number of days that it takes for a company to collect payment after a bill raised. It is a key performance indicator that helps businesses assess their efficiency in managing accounts receivable. A lower DSO indicates quicker collection of receivables, while a higher DSO may suggest potential issues in the collection process. The formula for calculating DSO is:

DSO = (FY Closing Balance) / (FY Revenue) × Days in Period

Number Cards:

PY Net Outstanding (A) - This represents the net outstanding amount from the previous fiscal year. It is calculated as the difference between the previous year's outstanding bills (PY OB) and the previous year's ON Account (PY OR).

• PY OB: Sum of the Claim Amount, excluding cancelled bills, from the previous fiscal year in Sales Invoice.

• PY OR: Sum of ON Account, excluding cancelled transactions, from the previous fiscal year in Bank Transaction.

FY Revenue (B) - This represents the revenue for the current fiscal year, calculated as the sum of the Claim Amount, excluding cancelled bills, in Sales Invoice.

FY Collection, TDS & Disallowance (C) - This is the total of the current fiscal year's bank collections, TDS, and disallowances.

• FY Bank Collection: Sum of Settled, ON Account, and Write-Back.

  • Settled: Sum of Paid Amount, excluding cancelled payments, in Payment Entry.

  • ON Account: Sum of ON Account, excluding cancelled transactions, in Bank Transaction.

  • Write-Back: Sum of Total Debit, where the ID has the suffix "WB" in Journal Entry.

• FY TDS: Sum of TDS Amount, excluding cancelled payments, in Payment Entry and Sum of Total Debit, where the ID has the suffix "TDS" in Journal Entry.

• FY Disallowance: Sum of Disallowed Amount, excluding cancelled payments, in Payment Entry and Sum of Total Debit, where the ID has the suffix "DIS" in Journal Entry.

FY Closing Balance (E = [A+B]-[C]) - Calculated as the sum of PY Net Outstanding and FY Revenue minus FY Collection, TDS, and Disallowance.

Table: Days of Outstanding

This table provides a breakdown of key financial metrics by financial quarter with region wise drill down. Each column represents different metrics contributing to the calculation of the Days of Outstanding (DSO).

• Financial Quarter: The specific quarter within the fiscal year.

• PY Net Outstanding (A): The net outstanding amount from the previous fiscal year.

• FY Revenue (B): The revenue for the current fiscal year.

• FY Collection, TDS & Disallowance (C): The total of the current fiscal year's bank collections, TDS, and disallowances.

• FY Closing Balance (E): The closing balance for the current fiscal year.

• Days in Period (F): Number of days in the reporting period.

• DSO (Days Sales Outstanding) [E/B]*F : A measure of the average number of days that it takes for a company to collect payment after bill raised.

  
  

Bar Chart: Days of Outstanding

This chart visualizes the DSO over different months within the financial quarter, providing a trend analysis for the outstanding days.

• PY Net O/s + Revenue: Total of previous year net outstanding and current year revenue.

• FY Collection, TDS and Disallowance: Total of bank collections, TDS, and disallowances for the current fiscal year.

• Days of Outstanding: The bar and line charts provide a monthly and quarterly visualization of the DSO, showing how it changes over time. High DSO: A high DSO indicates that the company is taking longer to collect payments, which may impact cash flow. Trend Analysis: The line chart shows the month-wise trend of DSO, helping in identifying periods with higher collection delays. Reconciliation Prioritization: Understanding the components contributing to the DSO can help in strategizing reconciliation and collection efforts.

Line Chart: Days of Outstanding

• This line chart describes the DSO over different months within the financial year, providing a trend analysis for the outstanding days. The month-wise DSO, showing how it changes over the financial quarter. This helps in identifying trends and potential issues in the collection process over time.

Strategic Implications:

• Cash Flow Management: Monitoring and reducing DSO is crucial for maintaining healthy cash flow.

• Collection Efficiency: Identifying periods or regions with higher DSO can lead to targeted collection strategies.

• Financial Planning: Accurate DSO calculations support better financial planning and forecasting.