Days Sales Outstanding - Calculation for All Periods

This document explains how the system calculates the Days Sales Outstanding (DSO) figures for all periods within a 12-month period ending today. This calculation is used in the Days Sales Outstanding KPI: on the KPI tile, in the drill-down by company, and in the drill-down by customer.

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.

Example

Example 1: This example shows the DSO calculation for all periods in a 12-month period where 3 months are taken into account for each period. In this example, P1 = 3, and P2 = 3.

Let's say the 12-month period ends in December. The system calculates the DSO figures for a 12-month period ending today (in December) as follows:

Adds the open receivables for the first month in the 12-month period, for the number of months specified by P1 (3) ending on that month.
In this example, this is the total open receivables for November, December, and January.
Repeats Step 1 for each month until the end of the 12-month period.
In this example, this is for February, March ...., until December.
Adds all 12 results for open receivables
Divides this sum by P1 (3).
Multiplies this total by 30.
Adds the sales for the first month in the 12-month period, for the number of months specified by P2 ( 3) ending on that month.
In this example, this is the total sales for November, December, and January.
Repeats Step 6 for each month until the end of the 12-month period.
In this example, this is for February, March ...., until December.
Adds all 12 results for sales.
Divides this sum by P2.
Divides the result from Step 5 by the result from Step 9.

The results then look like this:

This graphic is explained in the accompanying text.

Total Sales for the Last 12 Months (3-Monthly Periods)

This graphic is explained in the accompanying text.

Total Open Receivables for the Last 12 Months (3-Monthly Periods)

The DSO figure for all 12 periods ending in December 2014 is ([26,000 / 3] x 30) divided by (3,000 / 3) = 260.

To calculate the total open receivables for all 12 months 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: 11/30/2013, 12/31/2013, 01/31/2014, 02/28/2014, 03/31/2014, 03/31/2014, 04/30/2014 ..., 12/31/2014
Item Type: Normal Items, Special G/L Transactions
Filters Journal Entry More Filters Sales-Related Item: Yes

To calculate the sales for all 12 months in the system yourself, you need to set the following filters in the Manage Customer Line Items app.

For January select:

Company Code
Status: All Items
Posting Date: 11/01/2013 - 01/31/2014
Item Type: Normal Items, Special G/L Transactions
Filters Journal Entry More Filters Sales-Related Item: Yes

Repeat this procedure for each month until December 2014 (for example, for February: Posting Date: 12/01/2013 - 02/28/2014) and add up the 12 figures for January to December 2014.

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 all periods in a 12-month period where 12 months are taken into account for each period. In this example, P1 = 12, and P2 = 12.

Let's say the 12-month period ends in December. The system calculates the DSO figures for a 12-month period ending today (in December) as follows:

Adds the open receivables for the first month in the 12-month period, for the number of months specified by P1 (12) ending on that month.
In this example, this is the total open receivables for February 2013 to January 2014.
Repeats Step 1 for each month until the end of the 12-month period.
In this example, this is for February, March ...., until December.
Adds all 12 results for open receivables
Divides this sum by P1 (12).
Multiplies this total by 30.
Adds the sales for the first month in the 12-month period, for the number of months specified by P2 ( 12) ending on that month.
In this example, this is the total sales for February 2013 to January 2014.
Repeats Step 6 for each month until the end of the 12-month period.
In this example, this is for February, March ...., until December.
Adds all 12 results for sales.
Divides this sum by P2.
Divides the result from Step 6 by the result from Step 9.

The results then look like this:

This graphic is explained in the accompanying text.

Total Sales for the Last 12 Months (12-Monthly Periods)

This graphic is explained in the accompanying text.

Total Open Receivables for the Last 12 Months (12-Monthly Periods)

The DSO figure for all 12 periods ending in December 2014 is ([54,000 / 12] x 30) divided by (10,000 / 12) = 162.

To calculate the total open receivables for all 12 months in the system yourself, you need to set the filters below 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: 02/28/2013, 03/31/2013, 04/30/2013, 05/31/2013 ..., 12/31/2014
Item Type: Normal Items, Special G/L Transactions
Filters Journal Entry More Filters Sales-Related Item: Yes

To calculate the sales for all 12 months in the system yourself, you need to set the following filters in the Manage Customer Line Itemsapp.

For January select:

Company Code
Status: All Items
Posting Date: 02/01/2013 - 01/31/2014
Item Type:Normal Items, Special G/L Transactions
Filters Journal Entry More Filters Sales-Related Item: Yes

Repeat this procedure for each month until December 2014 (for example, for February: Posting Date: 02/01/2013 - 03/31/2014) and add up the 12 figures for January to December 2014.

Note Note

End of the note.

More Information

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