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 Days Sales Outstanding - Calculation for a Specific Period

 

This document explains how the system calculates the Days Sales Outstanding (DSO) figures for a specific period. This calculation is used in the Days Sales Outstanding KPI, in the drill-down by period.

The DSO is calculated as follows: (total open receivables last P1 months / P1) x 30 divided by (total monthly sales last P2 months / P2).

Prerequisites

In the SAP Smart Business Modeler, you need to specify the periods for which you want to calculate the DSO figures (for example for 1, 3, or 12 months). For this purpose, there are two input parameters that you need to set:

  • P_RblsRollingAverageMonths for receivables (referred to as P1 in this document)

  • P_RevnRollingAverageMonths for sales (referred to as P2 in this document)

These input parameters can have the same value or different values. When setting the P1 value, you need to consider that there could be values in open receivables that remain open for a long time before they are paid. When setting the P2 value, you need to consider whether sales take place sporadically or seasonally. As a rough guideline, if sales and payments are homogenous and frequent, the two parameters could be small and have the same value. The smaller P1 is, the more the DSO figures fluctuate. When payments are made, the DSO figures go down steeply; if payments are not made, the DSO figures go up steeply.

To calculate the DSO figures, the system takes into account open receivables (items that have been invoiced but not yet paid or cleared) and sales (items that have been invoiced, and may or may not have been paid). Partial payments are not taken into account. Items must be cleared completely.

Examples

The following examples show the DSO calculation for the following situation:

  1. In March, a customer orders goods worth USD 1,000, and an invoice is issued. The total monthly sales in March is 1,000 USD.

  2. The customer doesn‘t pay the 1,000 USD until December. So the amount of 1,000 USD remains open, and the total open receivables in March is 1,000 USD.

  3. When the customer pays the 1,000 USD in December, the open amount is set to 0 in open receivables.

Example

Example 1: This example shows the DSO calculation for March where P1 = 1, and P2 = 1.

The DSO is calculated as follows: (total open receivables last 1 months / 1) x 30 divided by total monthly sales last 1 month /1

DSO for March = ([1000 / 1] x 30) divided by (1000 / 1) = 30

The system calculates the DSO for March as follows:

  1. Adds the open receivables for the previous P1 (1) month.

    In this example, this is the total open receivables for March.

  2. Divides this sum by P1 (1).

  3. Multiplies this total by 30.

  4. Adds the sales for the number of months specified by P2 (1), ending on that month.

    In this example, this is the total sales for March.

  5. Divides this sum by P2 (1).

  6. Divides the results from Step 3 by the results from Step 5.

The results of the calculation look like this:

To calculate the total open receivables for March in the system yourself, you need to set the following filters in the Manage Customer Line Items app.

Note Note

To see the sum of open receivables at the bottom line of the app, you need to restrict the filter on the company code to those that have the same company code currency.

End of the note.

Select:

  • Company Code

  • Status: Open Items

  • Open on Key Date: 03/31/xxxx

  • Item Type: Normal Items, Special G/L Transactions

  • Start of the navigation path Filters Next navigation step Journal Entry Next navigation step More Filters Next navigation step Sales-Related Item: Yes End of the navigation path

To calculate the sales for March in the system yourself, you need to set the following filters in the Manage Customer Line Items app.

Select:

  • Company Code

  • Status: All Items

  • Item Type: Normal Items, Special G/L Transactions

  • Start of the navigation path Filters Next navigation step Journal Entry Next navigation step More Filters Next navigation step Sales-Related Item: Yes End of the navigation path

Note Note

In this example, the display currency is equivalent to the company code currency. Additionally, currency conversion only takes place if the display currency is different to the company code currency. With regard to currency conversion, you need to consider that the sales are converted with the exchange rate of the posting date. Thus, future changes in the exchange rate don't have any impact on the amount of sales. Receivables, however, are converted at the end of each reporting period. This means that the current exchange rate of each period will be used for currency conversion, which might lead to fluctuations in the amount of receivables. The receivables are therefore re-valued according to the current exchange rate.

End of the note.

Example

Example 2: This example shows the DSO calculation for March and May where P1 = 3, and P2 = 3.

The DSO is calculated as follows: (total open receivables last 3 months / 3) x 30 divided by total monthly sales last 3 months /3.

DSO for March (January to March) = ([0 + 0 + 1000 / 3] x 30) divided by (0 + 0 + 1000 / 3) = 30

DSO for May (March to May) = ([1000 + 1000 + 1000 / 3] x 30) divided by (1000 + 0 + 0 / 3) = 90

The system calculates the DSO for March as follows:

  1. Adds the open receivables for the previous P1 (3) months.

    In this example, this is the total open receivables for January, February, and March.

  2. Divides this sum by P1 (3).

  3. Multiplies this total by 30.

  4. Adds the sales for the number of months specified by P2 (3), ending on that month.

    In this example, this is the total sales for January, February, and March.

  5. Divides this sum by P2 (3).

  6. Divides the results from Step 3 by the results from Step 5.

The results of the calculation look like this:

To calculate the total open receivables for March, April, and May in the system yourself, you need to set the filters below in the Manage Customer Line Items app for each month end date. You need to add up the results for all three months to obtain the total open receivables.

Note Note

To see the sum of open receivables at the bottom line of the app, you need to restrict the filter on the company code to those that have the same company code currency.

End of the note.

Select:

  • Company Code

  • Status: Open Items

  • Open on Key Date: 03/31/xxxx; 04/30/xxxx; 05/31/xxxx

  • Item Type: Normal Items, Special G/L Transactions

  • Start of the navigation path Filters Next navigation step Journal Entry Next navigation step More Filters Next navigation step Sales-Related Item: Yes End of the navigation path

To calculate the sales for March and May, you need to set the following filters in the Manage Customer Line Items app.

Select:

  • Company Code

  • Status: All Items

  • Posting Date: 03/01/xxxx - 05/31/xxxx

  • Item Type: Normal Items, Special G/L Transactions

  • Start of the navigation path Filters Next navigation step Journal Entry Next navigation step More Filters Next navigation step Sales-Related Item: Yes End of the navigation path

More Information

For more information about the Days Sales Outstanding app, see Days Sales Outstanding.