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 KPI 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:
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.
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.
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:
Adds the open receivables for the last P1 (1) month.
In this example, this would be the total open receivables for March.
Divides this sum by P1 (1).
Multiplies this total by 30.
Adds the sales for the number of months specified by P2 (1), ending on that month.
In this example, this would be the total sales for March.
Divides this sum by P2 (1).
Divides the results from Step 3 with the results from Step 5.
The results of the calculation look like this:
DSO Calculation (P1 = 1, P2 = 1)
DSO Results (P1 = 1, P2 = 1)
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:
Adds the open receivables for the last P1 (3) months.
In this example, this would be the total open receivables for January, February, March.
Divides this sum by P1 (3).
Multiplies this total by 30.
Adds the sales for the number of months specified by P2 (3), ending on that month.
In this example, this would be the total sales for January, February, March.
Divides this sum by P2 (3).
Divides the results from Step 3 with the results from Step 5.
The results of the calculation look like this:
DSO Calculation (P1 = 3, P2 = 3)
DSO Results (P1 = 3, P2 = 3)
More Information
For information on the Days Sales Outstanding app, see Days Sales Outstanding.