Daily Sales Outstanding Calculation

Daily Sales Outstanding Calculation

See Also:
DSO – Daily Sales Outstanding
Daily Sales Outstanding Formula

Daily Sales Outstanding Calculation

The daily sales outstanding calculation requires little more than a basic understanding of mathematics. Maintaining proper financials allows this and other essential calculations to be performed. The days sales outstanding formula, ultimately, leads to monitoring the health and wealth of your business. As a whole, perform the calculation of Daily Sales Outstanding using different periods of time as the overall indicator. Whether it be by years, months, or days, the organization as a whole needs to decide which method of time is the most appropriate for successful figures and for impressions. This is important because the different time periods can portray different results in cash flows and statistical models.
Calculating Daily Outstanding Sales is fairly simple, as said before. First, divide the total (or average depending on if you need actual or average days) accounts receivable balance by the total credit sales. Then multiply this remaining number by the total number of days or months in the time period. This also depends upon whether you desire average or total days. See the following example below.

Example of Daily Sales Outstanding Calculation

For example, assume Total Credit Sales are $1,000,000 and Average Accounts Receivable is $100,000.

(DSO) Days Sales Outstanding Calculation: 365 X (100,000 / 1,000,000) = 36.5 days

This is a simplified explanation of how to calculate daily sales outstanding. What the days represent is essentially the average number of days that are needed in order to collect the total accounts receivable balance from clients. A trained CFO can provide more extensive analysis and solutions. At the same time, it would not be overly difficult to produce the same quality work as a trained CFO.
After you complete the calculation, match the figures against the competition in the industry. Then determine the overall health of the organization. As far as the final figures go, calculating the Daily Outstanding Sales can tell you a couple of things about the state of your business. If the credit sales are substantially higher than is customary, then your services are being handed out much like a loan. The customers are purchasing this service without paying. A consequence of this could be a negative effect on a company’s cash flows so extensive credit sales should be avoided without collection.
Download the A/R Checklist to see how simple changes in your A/R process can free up a significant amount of cash.
daily sales outstanding calculation
[box]Strategic CFO Lab Member Extra
Access your Cash Flow Tune-Up Tool Execution Plan in SCFO Lab. The step-by-step plan to get ahead of your cash flow.
Click here to access your Execution Plan. Not a Lab Member?
Click here to learn more about SCFO Labs[/box]

daily sales outstanding calculation

 

ARTICLES YOU MIGHT LIKE

Financial Ratios

See also:Quick Ratio AnalysisPrice to Book Value AnalysisPrice Earnings Growth Ratio AnalysisTime Interest Earned Ratio Analysis Use of Financial Ratios Financial Ratios are used to measure financial performance against standards. Analysts compare financial ratios to industry averages (benchmarking), industry standards or rules of thumbs and against internal trends (trends analysis). The most useful comparison when

Read More »

CPA’s are Specialized

The Difference in CPAs Looking back at my career I don’t know how many times I have introduced myself to someone and they ask, “Are you a CPA?” and I say yes. Then they tell me “you must be very busy with tax season” and I look at them with a bit of awe and

Read More »

Accounting VS. Bookkeeping

In our industry we often run into businesses that do not understand the difference between bookkeeping and accounting.  It is not the business owner’s fault. After all, they are in the business of making money for whatever service or product they sell.  But, to know if you are making any money you need to measure

Read More »

JOIN OUR NEXT SERIES

Financial Leadership Workshop

MARCH 28TH-31ST 2022

SHARE THIS ARTICLE
Share on facebook
Share on twitter
Share on linkedin

JOIN THE NEXT STRATEGIC CFO™ SERIES

Strategic CFO™ Financial Leadership Workshop
The Art of the CFO®

Days
Hours
Min
Sec

June 13th - 16th 2022