Industry Standard Ratios are estimates that use readily available figures from financial statements. A weighting is applied to any uncollected invoices to provide a more accurate measure of performance.
Average Days to Paid (ADTP) figures are exact calculations based only on invoices that have been paid. Unpaid invoices are not included in this measure.
Days Sales Outstanding (DSO) and Days Beyond Terms (DBT) can fluctuate from month to month and throughout the year, depending on an entity’s seasonal business cycle.
Days Sales Outstanding (DSO)
Days Sales Outstanding (DSO) estimates the average time it takes for a business to collect payment after issuing an invoice. Different time periods may be applied depending on reporting requirements.
Formula:
DSO = (Accounts Receivable / 30 days sales) × 30
Days Beyond Terms (DBT)
Days Beyond Terms (DBT) is a weighted average calculation used to estimate the average number of days invoices remain unpaid past their due date.
Formula:
DBT = ((Td1 × 15) + (Td2 × 45) + (Td3 × 75) + (Td4 × 105)) / Accounts Receivable
Where:
Td1 = Total dollars aged 1–30 days
Td2 = Total dollars aged 31–60 days
Td3 = Total dollars aged 61–90 days
Td4 = Total dollars aged 91+ days
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