For any business, managing accounts receivable is an essential part of maintaining healthy cash flow. It can be challenging to keep track of outstanding payments from customers and clients, which is why tracking the right metrics is crucial. While there are many important metrics and key performance indicators that should be considered, in this blog, we discuss the top four metrics to track for better accounts receivable management, helping you keep your finances in check.
Four of the Top Metrics to Track in Accounts Receivable Management
1. Days Sales Outstanding (DSO): DSO is the number of days it takes to collect payment from customers after a sale has been made. This metric can help you determine if your collection process is efficient or not. A high DSO indicates that customers are taking longer to pay, while a low DSO means that customers are paying faster. Keeping track of DSO can help you improve your collection process and manage your cash flow better.
2. Average Days Delinquent (ADD): ADD is the average number of days that payments are overdue. Tracking this metric can help you identify customers who consistently delay payment, allowing you to take corrective measures to address the issue.
3. Customer Aging: Customer aging is a report that shows how long your customers’ invoices have been outstanding. It helps you keep track of unpaid invoices and identify potential payment issues. By tracking customer aging, you can prioritize collections and take necessary actions to address payment delays.
4. Payment Ratio: Payment ratio is the percentage of outstanding invoices that have been paid by customers. A low payment ratio indicates that customers are not paying their bills on time, while a high payment ratio means that customers are paying promptly. Monitoring payment ratios can help you identify payment trends and take corrective action to improve them.
By tracking the right metrics, you can gain insight into your payment process, identify payment delays, and improve your cash flow. While the metrics to track in accounts receivable management reviewed in this blog are just a few of the many, by keeping a close eye on these metrics, you can take proactive measures to ensure that your business’s finances stay on track. If your company’s accounts receivables need better measurement or assistance in strengthening your organization in areas of opportunity, call us at 941.375.0300.
