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Net 30 payment terms mean the full invoice amount is due within 30 calendar days of the invoice date. It’s the default standard in B2B and SaaS: it gives customers breathing room while keeping your payment cycle short enough to manage cash flow predictably. The mechanics are straightforward. Send an invoice on July 1st, payment is due by July 31st. Weekends and holidays count. The clock starts on the invoice date unless your contract says otherwise.

Where it gets more interesting is in the variations. A term like 2/10 Net 30 gives customers a 2% discount if they pay within 10 days instead of 30. For buyers, that discount represents a compelling annualized return. For sellers, it’s a lever to accelerate cash collection without chasing invoices. Keep reading to find out:

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What Does Net 30 Mean on an Invoice? (Definition)

Think of Net 30 as a simple promise: your customer gets 30 days to pay, and you get certainty about when that payment should arrive.

Definition of Net 30 Terms

Net 30 means full payment is due within 30 calendar days from a specified date, usually the invoice date. Issue an invoice on May 1st with Net 30 terms? Payment is due by May 31st. The 30-day period includes weekends and holidays unless your terms explicitly state otherwise.

Here’s what’s actually happening: you’re extending credit to your customer. You provide the service first, then request payment by a future date. Those 30 days represent an interest-free loan you’re offering.

Some businesses skip the “Net 30” terminology entirely, stating “payment is due in 30 days” on invoices to eliminate confusion. The concept stays the same, customers get a 30-day window to settle their account.

In B2B and SaaS environments, Net 30 is especially common because it aligns with corporate procurement processes and monthly accounting cycles. Many enterprise clients expect Net 30 as a baseline payment term.

How to Write Net 30 on an Invoice

On an invoice, Net 30 is typically written clearly in the payment terms section.

Examples:

“Payment terms: Net 30”
“Payment due within 30 days of invoice date”
“Net 30, full payment due by [due date]”

Adding the exact due date (e.g., “Due by May 31st”) helps reduce confusion and late payments.

Net 30 Formula

Net 30 follows a simple calculation:

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If an invoice is issued on March 10th under Net 30 terms, payment is due on April 9th.

If early payment discounts apply, such as 2/10 Net 30, the formula becomes:

Discount Amount = Invoice Total × Discount Percentage

For example, on a $5,000 invoice with 2/10 Net 30:

$5,000 × 2% = $100 discount
Payment within 10 days = $4,900
Payment within 30 days = $5,000

Unless specified otherwise, Net 30 always uses calendar days, not business days.

Why Net 30 Dominates Invoicing

Net 30 has become standard because it balances everyone’s needs effectively. Clients get breathing room to assess services and manage cash flow. SaaS providers get a reasonable timeline without excessive delays.

The 30-day window represents the sweet spot between immediate payment and longer terms like Net 60 or Net 90. Long enough for customer flexibility, short enough to avoid cash flow nightmares for your business.

How Net 30 Payment Terms Work in Practice (Examples)

Net 30 terms aren’t just theoretical, they create real challenges and opportunities in day-to-day business operations. For SaaS companies, getting the details right makes the difference between smooth cash flow and constant payment disputes.

When Does the 30-Day Clock Start Ticking?

The starting point for your Net 30 countdown varies more than most business owners realize. Industry practice typically uses the invoice date, but several different starting points exist depending on your business arrangement:

Invoice date: When you issue the invoice, the most common approach
Delivery date: When your service or product reaches the customer
Completion date: When implementation or project work finishes
End of month: Net 30 EOM starts the clock at month-end

To avoid disputes, always state the start date explicitly on your invoice: ‘Payment terms: Net 30 from invoice date.’ Ambiguity about when the clock starts is one of the most common causes of payment delays

Net 30 Due Date Examples

Here’s how Net 30 works with real invoice dates:

If an invoice is issued on March 1st with Net 30 terms, payment is due on March 31st.

If an invoice is issued on April 15th, the payment due date is May 15th.

If an invoice is issued on June 10th, payment is due on July 10th.

For example, if you send an invoice on August 5th, your customer has until September 4th to pay the full amount.

These examples show how Net 30 simply adds 30 calendar days to the invoice date to determine the due date.

Real-World Net 30 Examples

A SaaS company completes an implementation project on June 15th and sends an invoice the same day with Net 30 terms. Payment becomes due by July 15th. During this period, the client reviews the work, processes the invoice through their accounts payable department, and submits payment before the deadline.

For subscription-based SaaS businesses, Net 30 terms often align with monthly billing cycles. This structure allows enterprise clients to incorporate your service fees into their regular payment schedules, creating predictability for both parties.

Payment Term Confusion That Costs Money

Net 30 means 30 calendar days, not business days. Weekends and holidays count toward your payment window. This simple misunderstanding creates more payment delays than any other factor.

The difference between “Net 30” and “Due in 30 days” might seem subtle, but it matters. Net 30 almost always means payment within 30 calendar days of the invoice date and frequently includes early payment discount options. “Due in 30 days” sometimes refers to 30 days from when services were delivered.

Here’s what many businesses get wrong: assuming the start date is flexible. Once you’ve established when your Net 30 period begins, this becomes a binding part of your agreement. Changing it without clear communication strains business’ financial relationships and creates payment conflicts.

The best approach? Define all parameters upfront in your service agreements and maintain consistent communication throughout the billing process.

Early Payment Discounts: 2/10 Net 30 and More

Early payment discounts turn standard Net 30 terms into something much more interesting, a strategic financial tool that can benefit both sides of the transaction.

These payment incentives reward customers for paying quickly while helping businesses improve cash flow. But here’s what most people miss: the math behind these discounts reveals some compelling financial opportunities.

What Does 2/10 Net 30 Mean?

The notation “2/10 Net 30” represents a specific trade credit arrangement where customers receive a 2% discount if they pay within 10 days of the invoice date. Otherwise, the full amount becomes due within 30 days.

Think about this scenario: your SaaS business issues a $10,000 invoice with 2/10 Net 30 terms. If your customer pays within 10 days, they only need to pay $9,800 – saving $200. After the 10-day window closes, they pay the full amount by the 30-day deadline.

For SaaS companies, this creates a strategic advantage where customers gain immediate savings while you receive faster payments. Both parties win.

How to Calculate Early Payment Discounts

The calculation is straightforward: multiply the invoice amount by the discount percentage, then subtract that figure from the original total.

For a 2/10 Net 30 arrangement on a $1,000 invoice:

Calculate the discount: $1,000 × 0.02 = $20
Determine the discounted payment: $1,000 – $20 = $980

Here’s where it gets interesting from a financial perspective: these discounts represent significant annualized returns. A 2% discount for paying 20 days early equates to an annualized return of approximately 36.5% (2% × 365 ÷ 20 = 36.5%). A 1% discount on the same timeline represents an 18.25% annualized return. You can calculate this for any time period or discount % with the annualized return formula:

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The pattern is consistent: the first number represents the discount percentage, the second indicates the discount period in days, and the third specifies the full payment deadline.

SaaS businesses typically choose variations based on their specific cash flow requirements and customer relationships. A company facing seasonal cash crunches might offer higher discounts during tight periods, while businesses with steady cash flow might use smaller incentives consistently.

When to Offer or Accept Early Payment Terms

Should you offer these terms as a seller?

The decision comes down to your cost of capital and cash flow needs. Offer early payment discounts primarily when:

Your business faces cash flow challenges that make faster payments valuable
The cost of invoice financing exceeds the discount percentage
You’re running a strategic promotion to encourage customer loyalty

Should you accept them as a buyer?

The math is usually compelling. Unless your business can earn more than 37% on that money elsewhere, taking a 2/10 Net 30 discount typically represents a smart financial decision. Few legitimate investment opportunities offer returns that high.

But cash flow matters here too. Even with favorable returns, tight cash flow might require sticking to standard payment timelines rather than paying early for discounts.

The key is understanding your actual cost of capital and current cash position before making these decisions.

Pros and Cons of Using Net 30 Payment Terms for Businesses

Net 30 terms aren’t a magic solution, they come with real trade-offs that can make or break your cash flow strategy.

Whether you’re considering offering these terms to customers or evaluating them from a buyer’s perspective, understanding both sides helps you make smarter financial decisions.

Benefits for sellers

Competitive Advantage: Net 30 terms give you an edge when prospects are comparing service providers. Many buyers specifically seek vendors offering flexible payment terms, making this a key differentiator in crowded markets.
Increased Sales Accessibility: These terms make your offerings more accessible, especially to small businesses managing tight cash flows. More clients can afford your services without immediate payment pressure, often leading to higher conversion rates.
Customer Loyalty Building: Extending credit demonstrates confidence in your relationship and fosters longer-term business connections. For subscription-based SaaS companies, this goodwill often translates into improved retention rates.

Benefits for buyers

For buyers, Net 30 represents interest-free financing for a full month. This arrangement provides valuable breathing room to manage cash flow while accessing needed services immediately.

The 30-day window also allows time to verify that services meet expectations before payment. This verification period proves particularly valuable for SaaS implementations or complex service agreements.

Most importantly, buyers can potentially generate revenue using your product before payment comes due. Many clients appreciate this opportunity to test, implement, and even earn income before settling invoices.

Risks and drawbacks for both parties

Delayed Cash Flow: Your business effectively finances customers for 30 days, which can strain operations – especially for smaller SaaS providers who need predictable revenue streams.
Late Payment Risk: According to QuickBooks’ 2026 Small Business Late Payments Report, nearly 3 in 5 small businesses say at least some of their invoices are overdue by 30 days or more. For businesses offering Net 30, that means a significant share of payments will arrive late without a structured follow-up process in place.
Collection Challenges: Some clients may default entirely, forcing you to pursue collection actions that drain both time and resources.

Facing collection challenges? Have a look at our collection email templates and start writing effective email reminders that get results.

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For buyers, the primary risks include potential late fees and the administrative burden of tracking multiple payment deadlines across different vendors. Without careful management, buyers can accumulate more debt than their cash flow can handle.

The bottom line? Net 30 terms work best when both parties have solid financial processes in place. They’re powerful tools for building relationships and improving sales, but they require careful cash flow management to avoid creating problems bigger than the benefits they provide.

What Happens If a Net 30 Invoice Is Not Paid?

If a Net 30 invoice is not paid by the due date, it becomes overdue. At that point, your business moves from standard invoicing into collections.

Most companies follow a structured process to recover payment:

Send a reminder shortly after the due date
Follow up with additional emails or calls if there’s no response
Apply late fees or interest if these were defined in the contract
Escalate to formal notices for long outstanding invoices

In practice, delays are common. Even with clear Net 30 terms, invoices can get stuck in approval workflows, missed in inboxes, or deprioritized by customers managing their own cash flow.

The impact goes beyond a single payment. Late Net 30 invoices increase your days sales outstanding (DSO), reduce cash flow predictability, and force your team to spend time chasing payments instead of focusing on growth.

That’s why many businesses don’t just define Net 30 terms, they also build consistent follow-up processes using AR software to ensure invoices are paid on time.

Net 30 vs Net 60 vs Net 90

Not all payment terms are created equal. While Net 30 is the most common standard in B2B, longer terms like Net 60 and Net 90 are often negotiated in enterprise environments.

Here’s how they compare:

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Net 30

Net 30 provides a balance between flexibility and predictability. It gives clients time to process invoices internally while keeping your payment cycle reasonably short. For most SaaS and B2B businesses, this is the default standard.

Net 60

Net 60 doubles the waiting period. It’s common with larger companies that operate on extended accounts payable cycles. While it may help close enterprise deals, it increases your days sales outstanding (DSO) and ties up working capital for longer.

Net 90

Net 90 is typically reserved for large enterprises or government contracts. Waiting 90 days means your business is effectively financing the customer for three months. Without strong cash reserves or financing solutions, this can significantly impact liquidity.

Which Payment Term Should You Choose?

The right term depends on:

Your cash flow stability
Your cost of capital
Your customer’s negotiating power
Your sales strategy

Shorter terms improve liquidity. Longer terms may help win larger contracts. The key is understanding the trade-off between revenue growth and working capital risk.

How to Automate Your Net 30

Managing Net 30 terms manually works fine when you have a handful of clients. It breaks down fast when invoice volume grows, payment cycles overlap, and your team is tracking due dates across a spreadsheet.

AR automation removes the manual layer. The right tools create predictable cash flow by ensuring invoices get sent, reminders go out on time, and payments get tracked without anyone having to check a spreadsheet every morning.

With a tool like Upflow, you set Net 30 (or any payment term) at the customer or invoice level, and the collection workflow triggers automatically from there. The moment an invoice is issued, the due date is locked in and the right reminder sequence starts. A client with a clean payment history gets a light pre-due nudge. A slower payer enters a more proactive cadence with escalating follow-ups. All of it runs on the due date, payment history, and rules your team defines upfront.

Every communication is logged alongside the invoice. If a customer replies, the workflow pauses automatically so your team doesn’t send a follow-up the same day someone is already handling the account. Finance gets a full picture in one place. Customers get consistent, on-brand reminders that keep them on track without friction.

Early payment discounts like 2/10 Net 30 are handled the same way. Instead of manually tracking which invoices qualify and applying the correct percentage, Upflow applies the discount automatically when a customer pays within the window, reflects it in the customer portal, and syncs it back to your ERP as a credit note.

The result is that Net 30 stops being a deadline you hope customers respect. It becomes a process that reliably turns issued invoices into collected cash. Book a demo to see how it works.

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In May, your accounts receivable are superior to your gross sales, so you can add the days of the month straight to your AR days calculation. You then deduct your gross sales from your A/R balance to report it to the following month’s A/R.

Days in AR = 31 days.

$11,000 – $3,000 = $8,000 reported in A/R in June.

In June, your A/R is again higher than your gross sales, so you can again add the days of this month to your Days in AR or DSO. Then, you take out your gross sales from your accounts receivable to report it to the next month’s accounts receivable.

Days in AR = 61 days.

$8,000 – $1,000 = $7,000 reported in A/R in July.

In July, your A/R is lower than your gross sales, so you calculate a ratio between both to find out the number of days to add to your DSO. For this, you use the days in accounts receivable formula used in the simple method:

DSO = Your A/R at the end of the period / Gross sales over the period x Number of Days of the Period

$7,000 / $10,000 * 31 days = 21

Days in AR = 82 days (61 + 21 days)

That’s it! You’ve calculated your AR days: 82 days is the time it takes to convert your invoices into cash.

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In May, your accounts receivable are superior to your gross sales, so you can add the days of the month straight to your DSO calculation. You then deduct your gross sales from your A/R balance to report it to the following month’s A/R.

DSO = 31 days.

$11,000 – $3,000 = $8,000 reported in A/R in June.

In June, your A/R is again higher than your gross sales, so you can again add the days of this month to your DSO. Then, you take out your gross sales from your accounts receivable to report it to the next month’s accounts receivable.

DSO = 61 days.

$8,000 – $1,000 = $7,000 reported in A/R in July.

In July, your A/R is lower than your gross sales, so you calculate a ratio between both to find out the number of days to add to your DSO. For this, you use the DSO calculation formula used in the simple method:

DSO = Your A/R at the end of the period / Gross sales over the period x Number of Days of the Period

$7,000 / $10,000 * 31 days = 21

DSO = 82 days (61 + 21 days)

That’s it! You’ve calculated your DSO: 82 days is the time it takes to convert your invoices into cash.

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Days Sales Outstanding (DSO) measures how many days it takes your business to collect payment after issuing an invoice. The standard DSO formula is: DSO = (Accounts Receivable ÷ Total Credit Sales) × Number of Days.

There are two versions: the simple method, which gives a quick period average, and the countback method, which is more accurate for businesses with seasonal or uneven revenue. Most CFOs use the countback method. In this guide you will learn:

Want to calculate your DSO before diving deeper? Try our free DSO calculator spreadsheet and calculate your DSO in minutes.

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Depending on your industry, that might be a low DSO or a higher DSO than average. With time, you’ll get to know what your overall average DSO is and be able to spot any variation.

Limitations of the Simple DSO Formula

While this method is simple as it gives you a direct formula to calculate DSO, it doesn’t help you calculate a truly accurate DSO. Indeed, it is based on the average number of days it takes you to get paid over a given time frame.

If you want to calculate your DSO over a year, using the simple method will not take into account any seasonality in your business. So if your business is closed in August or doesn’t do much turnover in December, your DSO calculation will not be accurate.

To get a more accurate result that factors in your normal yearly ebbs-and-flows of business, you’d have to calculate your DSO for these different periods. Then, you’d compare them against each other to get a loose idea of your cash conversion cycle.

Not the simplest anymore – and still not as accurate as the next method we’re going to see.

The Countback Method to Calculate DSO

Countback DSO formula: Starting from the most recent month, subtract each month’s gross sales from your accounts receivable balance until it reaches zero. For months where AR exceeds sales, add the full days of that month to your DSO. For the final month, add: (Remaining AR ÷ That Month’s Sales) × Days in That Month.

The countback method is the more complex of the DSO calculation formulas. With this method of days outstanding calculation, you go back to find exactly the amount of time it took your company to get paid.

For this method, you need both your receivable balance and your gross sales amount over a given time frame – usually a month – from your balance sheet. Once you have these two numbers for each month, you compare them to each other going back in time.

If your AR amount is higher than your sales amount for the month, you add the number of days in the month to your DSO calculation (you start at 0). When moving back a month, you subtract your gross sales from your A/R.

If your gross sales are higher than your A/R amount, you calculate a day sales outstanding ratio. You divide your sales by your accounts receivable and then multiply this by X number of days in your month.

You count back every month until you find your gross sales are higher than your A/R. Once you’ve added this month’s ratio to your DSO, you’re done! Your DSO is the amount of time you’ve added together by counting back.

Here’s an example to make the countback method formula more concrete:

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DSO = 31 days.

$11,000 – $3,000 = $8,000 reported in A/R in June.

DSO = 61 days.

$8,000 – $1,000 = $7,000 reported in A/R in July.

DSO = Your A/R at the end of the period / Gross sales over the period x Number of Days of the Period

$7,000 / $10,000 * 31 days = 21

DSO = 82 days (61 + 21 days)

That’s it! You’ve calculated your DSO: 82 days is the time it takes to convert your invoices into cash.

Benefits of the Countback Method to Calculate DSO

This days sales outstanding formula is more complex but more accurate too. That’s why most CFOs and finance professionals use this method to calculate their company’s DSO and that’s why you should use it too.

Unlike the simple method, it is not based on an average over a period of time. Since it goes back in time, you can be assured that the DSO result you get is the most accurate month-by-month (or period-by-period).

Once you have your DSO value, you can benchmark it against your industry’s financial ratios. It’s always insightful to find out what the average accounts receivable to cash sales ratio is!

And if your competitors have public accounts, you could even calculate their DSO and find out if there is much variation with yours.

Of course, you can also use DSO calculation formulas to monitor your financial health over the years… For instance to see how a change in your pricing or profitability margin affects it.

But that amounts to a lot of calculations to do! The good news is: that there is a better way to calculate your days sales outstanding ratio and set up a strategy to reduce it.

Why Using Excel Isn’t the Best for DSO Calculation.

While it is tempting to calculate your DSO on an Excel spreadsheet, it is not the best way to do it. If you want to use the countback method (the most accurate), then it requires a few DSO formulas and probably some switching between different tables.

While it is doable (you could create a template for it), there are a few things to take into account:

It is error-prone: even the best mathematicians make mistakes sometimes. Calculating your DSO manually leaves room for inaccuracies.

It is not the most efficient: calculating your DSO by hand requires chasing the latest data from different softwares. The countback method is the most accurate but it does take time – especially if you want to calculate it for different periods. It’s time that could be used to actually work on achieving a lower dso.

Automating Your DSO Calculation

So, what’s the most accurate way to calculate your DSO that’s also time-efficient? It’s using the countback method but letting a tool do the calculation for you.

You could use an automated AR software with extensive analytics and dashboards, like Upflow!

Our AR management solution automatically calculates your financial ratios – that includes your days sales outstanding. And, of course, we use the countback method to do so. Upflow connects with your ERP or accounting software, so there is no need to keep switching between tables or software to chase the latest data.

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Not having to spend time calculating your days sales outstanding and juggling with different DSO formulas (and the other key financial metrics) means dedicating your energy to tasks with a higher added value.

The obvious next step is to try to reduce your DSO, but before you do, it helps to know what a “good” DSO looks like. That can vary widely depending on your business model, customer mix, and the payment norms in your sector.

That’s why benchmarking your Days Sales Outstanding against similar companies is so useful. It helps you see whether you’re making real progress or simply aligning with typical industry ranges. With that in mind, let’s take a look at the median DSO across different industries.

DSO Benchmarks by Industry: What Is a Good Days Sales Outstanding

Looking beyond simple averages, the table below shows the median DSO by industry. Use these benchmarks to understand how your Days Sales Outstanding compares with other companies in your space.

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According to our State of B2B Payments in 2024 report, the overall median DSO across industries is 56 days. That headline number is useful, but the real story is the spread between sectors, since some industries collect much faster than others.

More traditional service categories like Office and Facilities Management and Consulting tend to post higher DSOs, often because 90 day payment terms are common. Even so, median performers in Office and Facilities Management frequently find it hard to get customers to stick to those terms in practice. By contrast, the top quartile of companies in that sector, which we call the best in Upflow, bring DSO down to 78 days, meaning they collect well within their agreed terms.

At the other end of the spectrum, Clothing, Accessories and Home businesses show the lowest median DSO on Upflow. One likely reason is the cash tied up in physical inventory, which pushes teams to secure payment quickly after each sale. They can also enforce payment more directly by controlling credit exposure, since customers may not receive their next order until outstanding invoices are settled. That kind of leverage is harder in sectors like Office and Facilities Management, where services cannot realistically be paused as easily.

To make these benchmarks meaningful, you will first need to calculate your own DSO. Whichever method you choose, it gives you a clear starting point and makes it easier to see how you compare.

Now that you know where you stand on Days Sales Outstanding, let us look at the actions that will help you bring it down.

Steps to Reduce Your DSO

Once you’ve benchmarked your Days Sales Outstanding, the next step is turning that insight into action. The goal is simple: get invoices out faster, remove payment friction, and follow up consistently, without damaging customer relationships. Here are five practical steps you can implement to start bringing your DSO down.

1) Tighten payment terms and set expectations early

Reducing DSO starts before the invoice is even sent. Make payment terms explicit in proposals, order forms, and contracts, and repeat them on every invoice. Align on due dates, accepted payment methods, and who approves invoices on the customer side, so there are no surprises when it’s time to pay.

2) Fix the invoicing fundamentals and bill faster

Late or inaccurate invoices are an easy way to add days to your DSO. Send invoices immediately after delivery, include the right PO or reference details, and make them impossible to misinterpret (clear line items, taxes, banking details, and due date). Standardize templates and workflows so nothing slips, especially at month end.

3) Make paying effortless (and hard to postpone)

Customers pay faster when the payment process is frictionless. Offer multiple payment options such as card, bank transfer, and direct debit where relevant. Add payment links directly in the invoice and reminders, and ensure the approver has everything needed to act quickly without emailing back and forth.

4) Automate follow ups and prioritize the right accounts

Consistent follow up is what moves invoices from “forgotten” to “paid.” Use automated reminders before and after due dates, then escalate thoughtfully with a clear sequence (email, call, stakeholder escalation). Combine automation with prioritization so your team spends time on the invoices that will actually move the needle, like high value accounts or repeat late payers.

5) Strengthen credit and collections strategy with the right metrics

Not all DSO problems are collections problems. Review credit terms for new and risky customers, set credit limits, and adjust terms based on payment behavior. Track metrics like AR aging, dispute rates, and Collection Effectiveness Index (CEI) to spot where delays come from, then continuously improve the steps that create the most friction.

Upflow helps you apply these tactics end to end, from faster invoicing and easier payments to automated follow-ups and real-time AR visibility. The result is lower DSO with less manual work and a smoother customer experience.

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About the Author

Aashima Lamba is the Marketing Director at Upflow, where she leads the company’s global growth initiatives across digital, content, and campaign strategy. With a deep understanding of the SaaS buyer journey and full-funnel marketing, Aashima builds programs that attract, engage, and convert high-intent finance audiences.

At Upflow, she works closely with sales, product, and customer teams to ensure messaging resonates across every touchpoint, from thought leadership to revenue-driving campaigns. Her approach blends data-driven decision-making with creative storytelling to fuel brand awareness, pipeline generation, and customer retention.

With her deep understanding of finance audiences and unique perspective from collaborating across marketing, product, and sales, Aashima creates content that speaks directly to the challenges and goals of modern revenue teams. Her contributions to the Upflow blog turn industry insights into actionable messaging that resonates with finance leaders.

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The overall median debtor days across industries is 56 days, though there are significant variations by sector. Some industries collect payments faster than others. For example, traditional sectors like Office & Facilities Management and Consulting often see much higher debtor days, with businesses commonly working on longer payment terms. However, many companies within the median of Office & Facilities Management still face challenges enforcing these terms. In contrast, organizations in the top 25th percentile in this sector—what Upflow considers ‘best-in-class’—achieve a DSO of 78 days, effectively receiving payments within the agreed terms.

Meanwhile, Clothing, Accessories, and Home goods companies record the lowest median debtor days or DSO among industries tracked by Upflow. This difference is likely due to their dependency on physical inventory, which creates a need for faster payments post-transaction. These businesses also enforce payments by controlling credit access; clients don’t receive new inventory until past invoices are cleared. This approach contrasts sharply with sectors like Office & Facilities Management, where it’s more challenging to enforce timely payments due to limitations, such as not being able to ‘evict’ clients from their offices for non-payment.

Now that you know where your company stands as compared to other in your industry, you can focus on improving your debtor days

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Alex is the Co-founder and CEO of Upflow, where he leads the company’s mission to revolutionize how B2B businesses manage their cash flow. Backed by top-tier investors like Hedosophia, YCombinator, Hexa, and Lorimer Ventures, with more than $25m in funding to date, he is a strong advocate for financial transparency and operational excellence, bringing a founder’s perspective to the biggest challenges and opportunities in modern revenue management.

Alex developed Upflow’s widely recognized “5 Maturity Stages of Cash Collection” framework, a model that has helped hundreds of companies build scalable and efficient finance operations. He also co-hosts The Growth-Minded CFO podcast, where he engages with finance and business leaders on innovative approaches to financial leadership. His thought leadership explores the intersection of business strategy, financial discipline, and organizational growth.

As a regular contributor to Upflow’s blog, Alex shares insights on leadership, scaling SaaS businesses, and the future of B2B finance. His writing helps founders, CFOs, and revenue leaders make smarter decisions and build financially resilient companies.

Follow Alex on LinkedIn

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Alexandre is the Finance Director at Upflow, where he leads the company’s internal finance and accounting operations. With a background in both strategic finance and financial reporting, Alexandre brings a practical, detail-oriented approach to the complexities of B2B finance.

At Upflow, Alexandre ensures that internal processes from cash management to KPI reporting are optimized for transparency, accuracy, and growth-readiness. He helps build scalable finance systems that support Upflow’s mission to empower other finance teams through better collections and cash flow insights.

Alexandre regularly contributes to Upflow’s blog with in-depth articles on accounting metrics, financial ratios, reporting best practices, and operational benchmarks. His writing provides actionable advice for controllers, FP&A teams, and finance leaders navigating complex financial processes.

\n","position":"Finance Director at Upflow","slug":"alex-finance-director"}},"acf":{"seo_title":"Bad Debt Expense: How to Calculate, Record & Reduce It","seo_description":"Learn how to calculate bad debt expense using the allowance method and direct write-off method, record journal entries, and reduce bad debt in your AR process.","body":[{"acf_fc_layout":"paragraph","content":"

Bad debt expense is the cost your business takes on when a customer doesn’t pay. That invoice doesn’t just disappear. It hits your income statement and chips away at your cash flow.

\n"},{"acf_fc_layout":"paragraph","content":"

For most B2B companies, some level of bad debt is unavoidable. But how you account for it, estimate it, and act on it makes a significant difference to your financial health. Get it wrong and your balance sheet overstates what your receivables are actually worth. Get it right and you have an early warning system for collection risk built into your reporting. This guide covers everything you need to know:

\n"},{"acf_fc_layout":"bullet_list","items":[{"text":"What is Bad Debt?"},{"text":"Bad Debt Expense Formula: How to Calculate It"},{"text":"The Allowance Method"},{"text":"What is Allowance for Doubtful Accounts?"},{"text":"The Direct Write-Off Method"},{"text":"How to Record Bad Debt Expense (Journal Entry)"},{"text":"Bad Debt Provision"},{"text":"How to Reduce Bad Debt in AR"}]},{"acf_fc_layout":"paragraph","content":"

Upflow automates your AR process so overdue invoices get followed up consistently, before they become write-offs.

\n"},{"acf_fc_layout":"hubspot_cta","id":"8df0d460-70d0-40c2-bea0-b8236477d27a","alt":"Demo request"},{"acf_fc_layout":"space_block"},{"acf_fc_layout":"heading","text":"What is Bad Debt?","level":"h2"},{"acf_fc_layout":"paragraph","content":"

Bad debt is any receivable your business has given up on collecting. A customer owes you money, you’ve exhausted your options, and the invoice isn’t getting paid. At that point, it becomes a bad debt.

\n"},{"acf_fc_layout":"paragraph","content":"

It’s worth distinguishing this from doubtful debt. Doubtful debt is the grey zone: receivables that are overdue and at risk, but not yet confirmed as losses. Bad debt is the confirmed version. The invoice is gone.

\n"},{"acf_fc_layout":"paragraph","content":"

Bad debt commonly arises when businesses extend credit, offering Net 30 payment terms or similar, and the customer either can’t or won’t pay. The product or service has been delivered, the invoice sent, but the money never arrives.

\n"},{"acf_fc_layout":"paragraph","content":"

In accounting, bad debt shows up as bad debt expense: the cost you recognize on your income statement when receivables become uncollectible. It’s recorded as an expense because extending credit that doesn’t get repaid is a real cost to the business, even if no cash changes hands at the moment of write-off.

\n"},{"acf_fc_layout":"paragraph","content":"

Bad debt expense isn’t always tied to a specific invoice you’ve already written off. Under the allowance method (more on that below), you estimate bad debt expense at the end of each accounting period based on historical patterns, before individual invoices are confirmed lost. This keeps your financials accurate and GAAP-compliant by recognizing the cost in the same period as the revenue it relates to.

\n"},{"acf_fc_layout":"paragraph","content":"

For most B2B businesses, bad debt is a byproduct of extending credit. The goal isn’t to eliminate it entirely. Some level of bad debt is normal. The goal is to keep it low, track it consistently, and act on outstanding invoices before they reach the point of no return.

\n"},{"acf_fc_layout":"paragraph","content":"

Now that we have the definitions clear, let’s see how we can actually measure it.

\n"},{"acf_fc_layout":"space_block"},{"acf_fc_layout":"heading","text":"Bad Debt Expense Formula: How to Calculate It","level":"h2"},{"acf_fc_layout":"paragraph","content":"

There are three ways to calculate bad debt expense. Which one you use depends on the accounting method you follow.

\n"},{"acf_fc_layout":"heading","text":"Direct Write-Off Method","level":"h3"},{"acf_fc_layout":"paragraph","content":"

The direct write-off method skips estimation entirely. You don’t calculate bad debt expense in advance. You simply record it when a specific invoice is confirmed uncollectible, for the exact amount of that invoice.

\n"},{"acf_fc_layout":"paragraph","content":"

Bad Debt Expense = Amount of the Uncollectible Invoice

\n"},{"acf_fc_layout":"paragraph","content":"

It’s straightforward, but it has a significant drawback. Because you’re only recording the expense after the fact, the cost often lands in a different accounting period than the revenue it relates to. That makes your financials less accurate and isn’t compliant with GAAP for businesses that carry significant receivables. The IRS does accept it for tax purposes, which is why some smaller businesses use it.

\n"},{"acf_fc_layout":"heading","text":"Percentage of Sales Method","level":"h3"},{"acf_fc_layout":"paragraph","content":"

You take your total credit sales for the period and multiply by your historical bad debt rate.

\n"},{"acf_fc_layout":"paragraph","content":"

Bad Debt Expense = Total Credit Sales x Bad Debt Rate

\n"},{"acf_fc_layout":"paragraph","content":"

So if you did $500,000 in credit sales and historically 2% goes uncollected, your bad debt expense for the period is $10,000. Simple, consistent, and easy to apply at the end of each accounting period.

\n"},{"acf_fc_layout":"paragraph","content":"

The challenge is keeping your bad debt rate accurate. If your customer mix or payment behavior has shifted, a rate based on old data will give you a bad estimate. Review it at least annually.

\n"},{"acf_fc_layout":"heading","text":"Accounts Receivable Aging Method","level":"h3"},{"acf_fc_layout":"paragraph","content":"

This approach is more granular. Instead of applying one rate to total sales, you break your AR balance into aging buckets and apply a different uncollectible rate to each one based on how long invoices have been outstanding.

\n"},{"acf_fc_layout":"paragraph","content":"

The longer an invoice has been unpaid, the higher the likelihood it won’t be collected. A current invoice might carry a 1% uncollectible rate. An invoice 90 days past due might carry 40% or more. You multiply each bucket’s balance by its uncollectible rate, then sum the results to get your total estimated bad debt.

\n"},{"acf_fc_layout":"table_block","paste_table":"","caption":"","is_first_column_header":false,"header_cells":[{"content":"","align":"left","colspan":"1"},{"content":"<30 days","align":"left","colspan":"1"},{"content":"30-60 days","align":"left","colspan":"1"},{"content":"61-90 days","align":"left","colspan":"1"},{"content":">90 days","align":"left","colspan":"1"}],"rows":[{"cells":[{"content":"% not collected","align":"left","colspan":"1"},{"content":"1%","align":"left","colspan":"1"},{"content":"4%","align":"left","colspan":"1"},{"content":"10%","align":"left","colspan":"1"},{"content":"30%","align":"left","colspan":"1"}]},{"cells":[{"content":"Total receivables","align":"left","colspan":"1"},{"content":"$$10,000","align":"left","colspan":"1"},{"content":"$$2,000","align":"left","colspan":"1"},{"content":"$$5,000","align":"left","colspan":"1"},{"content":"$$3,000","align":"left","colspan":"1"}]},{"cells":[{"content":"Estimation of uncollected amount","align":"left","colspan":"1"},{"content":"$$100","align":"left","colspan":"1"},{"content":"$$80","align":"left","colspan":"1"},{"content":"$$500","align":"left","colspan":"1"},{"content":"$$900","align":"left","colspan":"1"}]},{"cells":[{"content":"Total bad debts","align":"left","colspan":"1"},{"content":"$$1,580","align":"left","colspan":"1"},{"content":"","align":"left","colspan":"1"},{"content":"","align":"left","colspan":"1"},{"content":"","align":"left","colspan":"1"}]}],"style":false},{"acf_fc_layout":"paragraph","content":"

This is called the analysis of receivables method and gives you a more accurate picture of actual collection risk than a flat percentage. For a deeper look at how to build and use aging buckets, see our guide to AR aging reports.

\n"},{"acf_fc_layout":"paragraph","content":"

The allowance method is the more involved of the two approaches, so it is worth understanding in detail before moving to the journal entries.

\n"},{"acf_fc_layout":"hubspot_cta","id":"26042576-ffe8-4ece-a176-5a0fd12ad4d0","alt":"Free AR Aging Report"},{"acf_fc_layout":"space_block"},{"acf_fc_layout":"heading","text":"The Allowance Method","level":"h2"},{"acf_fc_layout":"paragraph","content":"

The allowance method is the GAAP-compliant approach to accounting for bad debt. Instead of waiting until a specific invoice is confirmed uncollectible, you estimate your bad debt expense at the end of each accounting period and set aside a reserve in advance.

\n"},{"acf_fc_layout":"paragraph","content":"

This approach follows the matching principle: you recognize the expense in the same period as the revenue it relates to, not later when a specific invoice goes bad. That gives you more accurate financials and a cleaner picture of your true AR position.

\n"},{"acf_fc_layout":"paragraph","content":"

To estimate your allowance, you use either the percentage of sales method or the analysis of receivables method covered in the previous section. Most businesses with a significant AR balance use the aging method since it reflects actual collection risk by invoice age rather than applying a flat rate across everything.

\n"},{"acf_fc_layout":"paragraph","content":"

When you eventually write off a specific invoice, you debit the allowance for doubtful accounts and credit accounts receivable. The income statement is not affected at that point because the expense was already recorded when you set up the reserve.

\n"},{"acf_fc_layout":"space_block"},{"acf_fc_layout":"heading","text":"What is Allowance for Doubtful Accounts?","level":"h2"},{"acf_fc_layout":"paragraph","content":"

The allowance for doubtful accounts is the reserve account that sits at the heart of the allowance method. It is a contra-asset account on your balance sheet that reduces your gross accounts receivable down to the amount you actually expect to collect.

\n"},{"acf_fc_layout":"paragraph","content":"

So if you have $200,000 in AR and an allowance of $10,000, your balance sheet reflects $190,000 in net receivables. That $10,000 is not cash set aside anywhere. It is purely an accounting estimate that keeps your balance sheet honest about what your receivables are actually worth.

\n"},{"acf_fc_layout":"heading","text":"Is allowance for doubtful accounts a debit or credit?","level":"h3"},{"acf_fc_layout":"paragraph","content":"

The allowance for doubtful accounts carries a credit balance. When you increase the allowance, you credit the account. When you write off a specific invoice against it, you debit it. This is the opposite of a typical asset account, which is what makes it a contra-asset.

\n"},{"acf_fc_layout":"heading","text":"What type of account is allowance for doubtful accounts?","level":"h3"},{"acf_fc_layout":"paragraph","content":"

It is a contra-asset account, meaning it is paired with and offsets another asset account, in this case accounts receivable. It appears on the balance sheet directly below accounts receivable, reducing the net AR figure reported to stakeholders.

\n"},{"acf_fc_layout":"heading","text":"How it gets adjusted","level":"h3"},{"acf_fc_layout":"paragraph","content":"

The allowance is reviewed and adjusted at the end of each accounting period based on your latest estimate. If your bad debt experience worsens, you increase it. If collections improve, you reduce it. Over time it becomes one of the clearest signals of how well your credit and collections process is performing.

\n"},{"acf_fc_layout":"paragraph","content":"

The direct write-off method takes a simpler approach, but comes with tradeoffs worth understanding.

\n"},{"acf_fc_layout":"space_block"},{"acf_fc_layout":"heading","text":"The Direct Write-Off Method","level":"h2"},{"acf_fc_layout":"paragraph","content":"

The direct write-off method works the opposite way to the allowance method. You do not estimate anything in advance. You record bad debt expense only when a specific invoice is confirmed uncollectible, at the exact moment you decide to write it off.

\n"},{"acf_fc_layout":"paragraph","content":"

It is simple to apply and works fine if bad debts are rare in your business. For smaller companies with few credit sales, the administrative overhead of maintaining an allowance account is not always worth it.

\n"},{"acf_fc_layout":"paragraph","content":"

The main limitation is timing. Because the expense is recorded after the fact, it often falls in a different period than the revenue it relates to. That mismatch makes your financials less reliable and means the direct write-off method is not GAAP-compliant for companies with material receivables.

\n"},{"acf_fc_layout":"paragraph","content":"

It is, however, accepted by the IRS for tax purposes. Some businesses use the allowance method for their financial statements and the direct write-off method for their tax filings. If you are unsure which applies to your situation, your accountant can advise.

\n"},{"acf_fc_layout":"paragraph","content":"

For a broader look at how to set credit policies that reduce write-offs in the first place, see our guide to collecting unpaid invoices.

\n"},{"acf_fc_layout":"paragraph","content":"

Once you have chosen your method, here is how to record it in your books.

\n"},{"acf_fc_layout":"space_block"},{"acf_fc_layout":"heading","text":"How to Record Bad Debt Expense (Journal Entry)","level":"h2"},{"acf_fc_layout":"paragraph","content":"

How you record bad debt expense depends on which method you use. Here is how each one works in practice.

\n"},{"acf_fc_layout":"heading","text":"Recording Bad Debt Using the Direct Write-Off Method","level":"h3"},{"acf_fc_layout":"paragraph","content":"

When a specific invoice is confirmed uncollectible, you make a single journal entry:

\n"},{"acf_fc_layout":"table_block","paste_table":"","caption":"","is_first_column_header":false,"header_cells":[{"content":"Account","align":"left","colspan":"1"},{"content":"Debit","align":"left","colspan":"1"},{"content":"Credit","align":"left","colspan":"1"}],"rows":[{"cells":[{"content":"Bad debt expense","align":"left","colspan":"1"},{"content":"$$5,000","align":"left","colspan":"1"},{"content":"","align":"left","colspan":"1"}]},{"cells":[{"content":"Accounts receivable","align":"left","colspan":"1"},{"content":"","align":"left","colspan":"1"},{"content":"$$5,000","align":"left","colspan":"1"}]}],"style":false},{"acf_fc_layout":"paragraph","content":"

Debit: Bad Debt Expense Credit: Accounts Receivable

\n"},{"acf_fc_layout":"paragraph","content":"

You are removing the invoice from your AR and recording the loss as an expense in one step. Simple, but as covered earlier, this often lands the expense in the wrong accounting period.

\n"},{"acf_fc_layout":"heading","text":"Recording Bad Debt Using the Allowance Method","level":"h3"},{"acf_fc_layout":"paragraph","content":"

The allowance method requires two separate journal entries: one when you set up the reserve, and one when you write off a specific invoice against it.

\n"},{"acf_fc_layout":"paragraph","content":"

Step 1: Setting up the allowance

\n"},{"acf_fc_layout":"paragraph","content":"

At the end of the accounting period, you estimate your bad debt and record it by debiting bad debt expense and crediting your allowance for doubtful accounts. If you estimate $10,000 in uncollectible receivables, it looks like this:

\n"},{"acf_fc_layout":"table_block","paste_table":"","caption":"","is_first_column_header":false,"header_cells":[{"content":"Account","align":"left","colspan":"1"},{"content":"Debit","align":"left","colspan":"1"},{"content":"Credit","align":"left","colspan":"1"}],"rows":[{"cells":[{"content":"Bad debt expense","align":"left","colspan":"1"},{"content":"$$10,000","align":"left","colspan":"1"},{"content":"","align":"left","colspan":"1"}]},{"cells":[{"content":"Allowance for bad debt","align":"left","colspan":"1"},{"content":"","align":"left","colspan":"1"},{"content":"$$10,000","align":"left","colspan":"1"}]}],"style":false},{"acf_fc_layout":"paragraph","content":"

Debit: Bad Debt Expense $10,000 Credit: Allowance for Doubtful Accounts $10,000

\n"},{"acf_fc_layout":"paragraph","content":"

This hits your income statement now, in the same period as the related revenue.

\n"},{"acf_fc_layout":"paragraph","content":"

Step 2: Writing off a specific invoice

\n"},{"acf_fc_layout":"paragraph","content":"

Later, when a specific customer confirms they cannot pay, say a $2,000 invoice, you write it off against the allowance account you already set up. Your journal entry looks like this:

\n"},{"acf_fc_layout":"table_block","paste_table":"","caption":"","is_first_column_header":false,"header_cells":[{"content":"Account","align":"left","colspan":"1"},{"content":"Debit","align":"left","colspan":"1"},{"content":"Credit","align":"left","colspan":"1"}],"rows":[{"cells":[{"content":"Allowance for bad debt","align":"left","colspan":"1"},{"content":"$$2,000","align":"left","colspan":"1"},{"content":"","align":"left","colspan":"1"}]},{"cells":[{"content":"Accounts receivable","align":"left","colspan":"1"},{"content":"","align":"left","colspan":"1"},{"content":"$$2,000","align":"left","colspan":"1"}]}],"style":false},{"acf_fc_layout":"paragraph","content":"

Debit: Allowance for Doubtful Accounts $2,000 Credit: Accounts Receivable $2,000

\n"},{"acf_fc_layout":"paragraph","content":"

Notice that bad debt expense is not debited here. The expense was already recognized in Step 1. This entry simply removes the invoice from AR and draws down the reserve. Your income statement is unaffected at this point, which is exactly how the matching principle is supposed to work.

\n"},{"acf_fc_layout":"paragraph","content":"

For a full picture of how these entries flow through your financials and affect your cash flow analysis, that guide covers the broader reporting context.

\n"},{"acf_fc_layout":"paragraph","content":"

Beyond recording bad debt, most finance teams also maintain a forward-looking provision. Here is how that works.

\n"},{"acf_fc_layout":"space_block"},{"acf_fc_layout":"heading","text":"Bad Debt Provision","level":"h2"},{"acf_fc_layout":"paragraph","content":"

A bad debt provision is the amount you set aside at the end of each accounting period to cover receivables you expect won’t be collected. It is essentially the process of building and maintaining your allowance for doubtful accounts, applied consistently over time.

\n"},{"acf_fc_layout":"paragraph","content":"

The terms are often used interchangeably. Bad debt provision, bad debt reserve, and allowance for doubtful accounts all refer to the same underlying concept: a forward-looking estimate that keeps your financials honest about the real value of your AR.

\n"},{"acf_fc_layout":"heading","text":"How to calculate your bad debt provision","level":"h3"},{"acf_fc_layout":"paragraph","content":"

You calculate the provision using the same methods covered earlier: either a percentage of total credit sales or a weighted analysis of your AR aging buckets. The key is consistency. Using the same method each period makes your bad debt trends comparable over time, which is where the real insight comes from.

\n"},{"acf_fc_layout":"paragraph","content":"

If your provision is growing as a percentage of AR, that is a signal your collections process needs attention. If it is shrinking, your credit policies and follow-up process are working.

\n"},{"acf_fc_layout":"heading","text":"Reviewing and adjusting the provision","level":"h3"},{"acf_fc_layout":"paragraph","content":"

The provision is not a set-and-forget number. You review it at the end of each accounting period and adjust it based on your latest AR position and any changes in customer payment behavior.

\n"},{"acf_fc_layout":"paragraph","content":"

If actual write-offs come in higher than your provision, you top it up. If they come in lower, you release the excess back through the income statement. Either way, the goal is for the provision to be a realistic estimate, not a conservative buffer you never touch.

\n"},{"acf_fc_layout":"paragraph","content":"

Tracking your bad debt provision alongside your AR metrics gives you an early warning system for collection risk. A rising provision is one of the clearest indicators that your DSO is heading in the wrong direction, often before it shows up in your days sales outstanding figure.

\n"},{"acf_fc_layout":"space_block"},{"acf_fc_layout":"heading","text":"How to Reduce Bad Debt in AR","level":"h2"},{"acf_fc_layout":"paragraph","content":"

The best way to manage bad debt is to stop it from building up in the first place. Most bad debt isn’t random. It follows patterns: certain customer segments, certain payment terms, certain points in the collections process where invoices fall through the cracks.

\n"},{"acf_fc_layout":"paragraph","content":"

Set clear credit policies

\n"},{"acf_fc_layout":"paragraph","content":"

Before extending credit to a new customer, you should have a consistent process for evaluating risk. That means credit checks, defined credit limits, and clear payment terms agreed upfront. The businesses that struggle most with bad debt are often the ones that extend credit informally, without documentation or a formal approval process.

\n"},{"acf_fc_layout":"paragraph","content":"

A good credit policy removes ambiguity. Anyone on your team should be able to look at a customer account and know exactly what terms apply and what action to take if payment is late.

\n"},{"acf_fc_layout":"paragraph","content":"

Follow up early and consistently

\n"},{"acf_fc_layout":"paragraph","content":"

The single biggest driver of bad debt is late follow-up. Invoices that go uncontested for 60 or 90 days are significantly harder to collect than ones chased at 7 or 14 days past due. The earlier you follow up, the more leverage you have.

\n"},{"acf_fc_layout":"paragraph","content":"

Automated payment reminders remove the dependency on manual follow-up. You set the cadence once and every overdue invoice gets chased consistently, regardless of how busy your team is.

\n"},{"acf_fc_layout":"paragraph","content":"

Monitor your AR aging report

\n"},{"acf_fc_layout":"paragraph","content":"

Your AR aging report is your earliest warning system for bad debt risk. Invoices sitting in the 61 to 90 day bucket today are your bad debt candidates tomorrow. Reviewing it weekly and acting on at-risk accounts before they age further is one of the highest-leverage habits your finance team can build.

\n"},{"acf_fc_layout":"paragraph","content":"

Segment your customers

\n"},{"acf_fc_layout":"paragraph","content":"

Not every customer carries the same collection risk. Segmenting your AR by customer type, payment history, or invoice size lets you prioritize your collections effort and tailor your approach. A long-standing customer who is occasionally late needs a different follow-up than a new customer who has never paid on time.

\n"},{"acf_fc_layout":"paragraph","content":"

Use AR automation

\n"},{"acf_fc_layout":"paragraph","content":"

Manual AR processes do not scale. As your business grows, the volume of invoices, reminders, and follow-ups grows with it. AR automation handles the repetitive work: sending reminders, escalating overdue accounts, matching payments, and flagging risk. Your team focuses on the accounts that need human judgment.

\n"},{"acf_fc_layout":"paragraph","content":"

Upflow is built specifically for this. It automates your collections workflow, gives you real-time visibility into your AR position, and helps you act on overdue invoices before they become write-offs.

\n"},{"acf_fc_layout":"hubspot_cta","id":"8df0d460-70d0-40c2-bea0-b8236477d27a","alt":"cta request a demo"},{"acf_fc_layout":"space_block"},{"acf_fc_layout":"heading","text":"FAQs","level":"h2"},{"acf_fc_layout":"article_faq","items":[{"question":"What is bad debt expense, and how is it different from bad debt?","answer":"

Bad debt expense is an accounting entry that records the amount of receivables your business expects will never be collected. It appears on your income statement as an operating expense. Bad debt is the actual unpaid invoice that gets written off once it’s confirmed uncollectible. Bad debt expense is the estimate you make in advance. Doubtful debt sits in between: receivables that might not be collected but haven’t been written off yet. Businesses estimate doubtful debts using historical data and report them through a bad debt allowance.

\n"},{"question":"What is the allowance for doubtful accounts?","answer":"

The allowance for doubtful accounts is a contra-asset account on your balance sheet that estimates the portion of your accounts receivable you don’t expect to collect. Instead of waiting until an invoice is confirmed uncollectible, you set aside a reserve in advance based on historical data or an aging analysis. This gives your financial statements a more accurate picture of what your receivables are actually worth. It sits as an offset to accounts receivable on the balance sheet, reducing the net amount to what you realistically expect to receive.

\n"},{"question":"What is the allowance method for bad debt?","answer":"

The allowance method is an accounting approach where you estimate and record bad debt expense before specific invoices are confirmed uncollectible. Rather than writing off debts as they occur, you proactively set aside a bad debt reserve each accounting period based on your historical bad debt rate or an AR aging analysis. This keeps your financials compliant with GAAP’s matching principle, recording the expense in the same period as the related revenue.

\n"},{"question":"Is bad debt expense a debit or a credit?","answer":"

Bad debt expense is recorded as a debit in your general ledger because it increases your expenses. Depending on the method used, the credit entry will either reduce Accounts Receivable (direct write-off method) or increase Allowance for Doubtful Accounts (allowance method).

\n"},{"question":"Where does bad debt expense show up in financial statements?","answer":"

Bad debt expense appears on the income statement under operating expenses. If you’re using the allowance method, the corresponding allowance for doubtful accounts shows up as a contra-asset on the balance sheet, offsetting your accounts receivable to reflect the net amount you actually expect to collect. It does not appear on the cash flow statement directly, since bad debt is a non-cash expense.

\n"},{"question":"What is a bad debt provision?","answer":"

A bad debt provision (also called a bad debt reserve) is the amount a business sets aside to cover receivables it expects won’t be collected. It’s calculated at the end of each accounting period using either a percentage of total credit sales or an aging of your AR balance. The provision sits in your allowance for doubtful accounts and acts as a buffer, so when you do write off a specific invoice, it doesn’t hit your income statement as a surprise expense.

\n"},{"question":"How do you calculate bad debt expense?","answer":"

There are two main approaches. The direct write-off method records bad debt only when a specific invoice is confirmed uncollectible, you total up what you wrote off during the period. The allowance method uses a formula: multiply your historical bad debt rate by your total credit sales to estimate future uncollectibles, or apply percentage weights to each bucket of your AR aging report. For most businesses doing regular credit sales, the allowance method gives a more accurate and GAAP-compliant result.

\n"},{"question":"When should I write off an invoice as bad debt?","answer":"

Write off an invoice when there’s no realistic chance of collecting payment, typically after multiple reminders, escalations, and an extended period of non-payment. The IRS also requires you to demonstrate reasonable collection efforts before writing off a bad debt for tax purposes. The longer an invoice goes unpaid, the slimmer the odds of recovery, which is why monitoring your AR aging report regularly helps you act before debts become unrecoverable.

\n"},{"question":"How can you reduce bad debt in your business?","answer":"

It starts with being proactive rather than reactive. Set clear credit policies and payment terms before extending credit to new customers. Send payment reminders early and consistently, not just when invoices are severely overdue. Segment your customers and tailor your follow-up approach based on their payment history. Monitor your AR aging report regularly so you can spot at-risk invoices before they become write-offs. AR software like Upflow automates the repetitive parts of this process, so your team can focus on the accounts that actually need attention.

\n"}]}],"primary_category":{"term_id":374,"name":"AR metrics","slug":"ar-metrics","term_group":0,"term_taxonomy_id":97,"taxonomy":"category","description":"Tracking your receivable KPIs is crucial to mesure the efficiency of your cash collection. But which metric should you track? And how can you calculate and improve them? Have a look at our dedicated articles.","parent":0,"count":27,"filter":"raw"},"right_sidebar_call_to_action_id":"9e46da10-4f70-412d-8b77-035d7cf4ad02","right_sidebar_call_to_action_alt":"AR Aging Report for % of Bad Debt","related_author_id":10617,"date_modified":"28/07/2026","og_image":false,"og_title":"","og_description":"","_taxonomies":{"category":[{"id":374,"name":"AR metrics","slug":"ar-metrics","description":"Tracking your receivable KPIs is crucial to mesure the efficiency of your cash collection. But which metric should you track? And how can you calculate and improve them? Have a look at our dedicated articles.","parent":null}],"translation_priority":[{"id":11,"name":"Optional","slug":"optional","description":"","parent":null}]}},"publishedAt":"May 22, 2026","publishedAtIso":"2026-05-22T02:00:00Z","modifiedAtIso":"$undefined"},{"title":"Net 30 Payment Terms: Meaning, Examples & 2/10 Net 30","description":"Understand Net 30 payment terms, how due dates are calculated, how early discounts work, and what businesses should watch out for.","image":"https://cms.upflow.dev.3codes.io/wp-content/uploads/2026/04/net-30-terms.png","imageAlt":"","fields":{"link":"/blog/ar-metrics/net-30-terms","_taxonomies":{"article_type":[{"id":374,"name":"AR metrics","slug":"ar-metrics","description":""}]},"author":{"name":"Quentin Gaudinat","image":"https://cms.upflow.dev.3codes.io/wp-content/uploads/2026/07/4-1.png","description":"

About the Author

Quentin is the Global Sales Director at Upflow, where he helps SaaS companies transform their revenue operations and improve cash flow performance. With hands-on experience advising hundreds of B2B finance teams, Quentin understands what it takes to build scalable financial processes in high-growth environments.

At Upflow, Quentin bridges the gap between sales and finance by enabling businesses to adopt smarter AR practices that accelerate collections and reduce friction in customer relationships. His work centers on helping SaaS leaders leverage automation and data for better financial outcomes.

On the Upflow blog, Quentin shares actionable insights for SaaS operators navigating the evolving finance and tech landscape. He writes about tools, trends, and strategies that help companies choose the right systems, streamline operations, and scale sustainably.

\n","position":"Global Sales Director at Upflow","slug":"quentin"}},"acf":{"seo_title":"Net 30: Meaning, Examples & 2/10 Net 30 Explained","seo_description":"Understand Net 30 payment terms, how due dates are calculated, how early discounts work, and what businesses should watch out for.","body":[{"acf_fc_layout":"paragraph","content":"$52"},{"acf_fc_layout":"color_block","content":"

Net 30 means the full invoice must be paid within 30 calendar days of the invoice date.

The countdown usually starts from the invoice date
Weekends and holidays are included
It’s a standard B2B payment term
It can include early discounts like 2/10 Net 30

\n"},{"acf_fc_layout":"paragraph","content":"$53"},{"acf_fc_layout":"color_block","content":"

Due Date = Invoice Date + 30 Calendar Days

\n"},{"acf_fc_layout":"paragraph","content":"$54"},{"acf_fc_layout":"color_block","content":"

Annualized return (%) = (Discount % ÷ (1 – Discount %)) × (365 ÷ Days Saved)

\n"},{"acf_fc_layout":"paragraph","content":"

Automating Early Payment Discounts

Calculating early payment discounts is simple in theory. Applying them consistently in practice is another story.

Many finance teams struggle to manually track which invoices qualify for discounts, apply the correct percentage, and reflect it properly in their accounting system. Mistakes can lead to revenue leakage, confusion, or back-and-forth with customers.

With AR automation tools like Upflow, early payment discounts can be automatically applied when customers pay within the discount window. The discount is reflected directly in the customer portal, clearly labeled, and synced back to your ERP (such as NetSuite) as a credit note.

\n"},{"acf_fc_layout":"paragraph","content":"

1/10 Net 30 and Other Variations

Different businesses use various early payment discount structures based on their cash flow needs. Here are examples other net 30 payment terms combined with discounted rates:

\n"},{"acf_fc_layout":"table_block","paste_table":"","caption":"","is_first_column_header":false,"header_cells":[{"content":"Early Payment Discount Terms","align":"left","colspan":"1"},{"content":"Discount Means","align":"left","colspan":"1"},{"content":"Annualized Return*","align":"left","colspan":"1"},{"content":"Early Payment Discount on $1,000 (Invoice May 1)","align":"left","colspan":"1"},{"content":"Net Amount After Discount","align":"left","colspan":"1"}],"rows":[{"cells":[{"content":"3/10 Net 30","align":"left","colspan":"1"},{"content":"3% off if paid in 10 days","align":"left","colspan":"1"},{"content":"54%","align":"left","colspan":"1"},{"content":"$$30 if paid by May 11","align":"left","colspan":"1"},{"content":"$$970","align":"left","colspan":"1"}]},{"cells":[{"content":"2/15 Net 30","align":"left","colspan":"1"},{"content":"2% off if paid in 15 days","align":"left","colspan":"1"},{"content":"48%","align":"left","colspan":"1"},{"content":"$$20 if paid by May 16","align":"left","colspan":"1"},{"content":"$$980","align":"left","colspan":"1"}]},{"cells":[{"content":"1/15 Net 30","align":"left","colspan":"1"},{"content":"1% off if paid in 15 days","align":"left","colspan":"1"},{"content":"24%","align":"left","colspan":"1"},{"content":"$$10 if paid by May 16","align":"left","colspan":"1"},{"content":"$$990","align":"left","colspan":"1"}]},{"cells":[{"content":"1/10 Net 30","align":"left","colspan":"1"},{"content":"1% off if paid in 10 days","align":"left","colspan":"1"},{"content":"18%","align":"left","colspan":"1"},{"content":"$$10 if paid by May 11","align":"left","colspan":"1"},{"content":"$$990","align":"left","colspan":"1"}]},{"cells":[{"content":"1/5 Net 30","align":"left","colspan":"1"},{"content":"1% off if paid in 5 days","align":"left","colspan":"1"},{"content":"14.4%","align":"left","colspan":"1"},{"content":"$$10 if paid by May 6","align":"left","colspan":"1"},{"content":"$$990","align":"left","colspan":"1"}]}],"style":false},{"acf_fc_layout":"paragraph","content":"$55"},{"acf_fc_layout":"hubspot_cta","id":"12a2144f-0ec6-4566-8a8a-14d7a96b9823","alt":"Collection email templates"},{"acf_fc_layout":"paragraph","content":"$56"},{"acf_fc_layout":"table_block","paste_table":"","caption":"","is_first_column_header":false,"header_cells":[{"content":"Payment Term","align":"left","colspan":"1"},{"content":"Payment Due","align":"left","colspan":"1"},{"content":"Best For","align":"left","colspan":"1"},{"content":"Cash Flow Impact","align":"left","colspan":"1"}],"rows":[{"cells":[{"content":"Net 30","align":"left","colspan":"1"},{"content":"30 calendar days after invoice date","align":"left","colspan":"1"},{"content":"Standard B2B services and SaaS subscriptions","align":"left","colspan":"1"},{"content":"Moderate","align":"left","colspan":"1"}]},{"cells":[{"content":"Net 60","align":"left","colspan":"1"},{"content":"60 calendar days after invoice date","align":"left","colspan":"1"},{"content":"Mid-sized to enterprise clients","align":"left","colspan":"1"},{"content":"Higher delay risk","align":"left","colspan":"1"}]},{"cells":[{"content":"Net 90","align":"left","colspan":"1"},{"content":"90 calendar days after invoice date","align":"left","colspan":"1"},{"content":"Large corporations with strict procurement cycles","align":"left","colspan":"1"},{"content":"Significant cash flow strain","align":"left","colspan":"1"}]}],"style":false},{"acf_fc_layout":"paragraph","content":"$57"},{"acf_fc_layout":"hubspot_cta","id":"81d5abc2-34c2-437b-b97d-0caa8436db31","alt":"demo"},{"acf_fc_layout":"article_faq","items":[{"question":"What exactly does Net 30 mean in business terms? ","answer":"

Net 30 is a payment term that gives customers 30 calendar days to pay their invoice in full after the invoice date. It’s essentially a short-term, interest-free credit arrangement commonly used in B2B transactions.

\n"},{"question":"How do you calculate a Net 30 due date?","answer":"

To calculate a Net 30 due date, add 30 calendar days to the invoice date. For example, if an invoice is issued on April 1st, the payment is due on May 1st. Weekends and holidays are included unless stated otherwise.

\n"},{"question":"Does Net 30 include weekends?","answer":"

Yes. Net 30 typically refers to 30 calendar days, not business days. That means weekends and holidays are included in the countdown unless your contract explicitly states otherwise. For example, if an invoice is issued on June 1st under Net 30 terms, payment is due on July 1st, regardless of weekends in between.

\n"},{"question":"Is Net 30 from the invoice date or delivery date?","answer":"

Net 30 terms typically start from the invoice date, but they can also be tied to other milestones such as the delivery date or the completion date of a project. It’s important to specify the starting point on the invoice and in service agreements to avoid confusion and payment disputes.

\n"},{"question":"How does the 2/10 Net 30 payment term work? ","answer":"

2/10 Net 30 means that if the customer pays within 10 days of the invoice date, they receive a 2% discount on the total amount. If they don’t take advantage of this early payment discount, the full amount is due within 30 days.

\n"},{"question":"Can Net 30 be negotiated?","answer":"

Yes, Net 30 terms can be negotiated depending on your relationship, deal size, and bargaining power. Some buyers may request longer terms like Net 60 or Net 90, especially in enterprise environments. On the other hand, smaller vendors may push for shorter terms like Net 15 to protect cash flow. Payment terms are part of commercial negotiations and should reflect both parties’ financial realities.

\n"},{"question":"What happens if Net 30 is not paid?","answer":"

It becomes overdue and your collections process kicks in. Most businesses start with a reminder email shortly after the due date, escalate with follow-ups if there’s no response, and apply late fees if those were defined in the contract. Beyond the individual invoice, unpaid Net 30 invoices increase your DSO and force your team to spend time chasing payments instead of focusing on growth. A structured AR collections process prevents most of this from happening in the first place.

\n"},{"question":"How can businesses automate their Net 30 processes?","answer":"

Use an AR automation tool that lets you set payment terms at the customer or invoice level and triggers collection workflows automatically from the due date. Upflow handles this end to end: reminders go out on a schedule your team defines, early payment discounts like 2/10 Net 30 are applied automatically when customers pay within the window, and everything syncs back to your ERP. The result is fewer manual touchpoints and more predictable cash flow.

\n"},{"question":"How do Net 30 terms affect DSO and what tools help reduce it?","answer":"

Net 30 terms directly set the baseline for your days sales outstanding. If customers consistently pay on day 35 or 40 instead of day 30, your DSO creeps up and cash flow becomes harder to forecast. The fastest way to keep DSO close to your stated terms is to automate follow-up so reminders go out before the due date, not after. Upflow lets finance teams set Net 30 at the customer level and automatically triggers collection workflows tied to the due date, helping teams that use it bring DSO closer to their actual payment terms rather than what customers decide to pay.

\n"}]}],"primary_category":{"term_id":374,"name":"AR metrics","slug":"ar-metrics","term_group":0,"term_taxonomy_id":97,"taxonomy":"category","description":"Tracking your receivable KPIs is crucial to mesure the efficiency of your cash collection. But which metric should you track? And how can you calculate and improve them? Have a look at our dedicated articles.","parent":0,"count":27,"filter":"raw"},"right_sidebar_call_to_action_id":"fa9d10f7-dd76-4797-9f51-15d35b9b6cfe","right_sidebar_call_to_action_alt":"Upflow's free discover plan","related_author_id":10653,"date_modified":"28/07/2026","og_image":false,"og_title":"","og_description":"","canonical_mode":"auto","x_default_mode":"auto","noindex":false,"nofollow":false,"_taxonomies":{"category":[{"id":374,"name":"AR metrics","slug":"ar-metrics","description":"Tracking your receivable KPIs is crucial to mesure the efficiency of your cash collection. But which metric should you track? And how can you calculate and improve them? Have a look at our dedicated articles.","parent":null}],"translation_priority":[{"id":11,"name":"Optional","slug":"optional","description":"","parent":null}]}},"publishedAt":"April 17, 2026","publishedAtIso":"2026-04-17T02:00:00Z","modifiedAtIso":"$undefined"},{"title":"Average Collection Period: Formula, Calculation & Examples","description":"Learn how to calculate average collection period with simple steps, practical examples, and tips to improve collections and maintain steady cash flow.","image":"https://cms.upflow.dev.3codes.io/wp-content/uploads/2026/04/average-collection-period.png","imageAlt":"","fields":{"link":"/blog/ar-metrics/average-collection-period","_taxonomies":{"article_type":[{"id":374,"name":"AR metrics","slug":"ar-metrics","description":""}]},"author":{"name":"Alexandre Antoine","image":"https://cms.upflow.dev.3codes.io/wp-content/uploads/2026/07/9-1.png","description":"

\n","position":"Finance Director at Upflow","slug":"alex-finance-director"}},"acf":{"seo_title":"Average Collection Period: Formula, Calculation & Examples","seo_description":"Learn how to calculate average collection period with simple steps, practical examples, and tips to improve collections and maintain steady cash flow.","body":[{"acf_fc_layout":"paragraph","content":"

Average collection period is a key financial metric that shows how long it takes for your business to collect payments from customers after a credit sale. It gives you a clear, time-based view of how efficiently your accounts receivable are being managed and how quickly your revenue is converted into cash.

\n"},{"acf_fc_layout":"paragraph","content":"

Understanding your average collection period can help you identify delays in payments, evaluate your credit policies, and improve your overall cash flow. By tracking this metric consistently, you can spot trends in customer behavior and take action to ensure your collections process stays efficient and predictable. Keep reading to find out:

\n"},{"acf_fc_layout":"bullet_list","items":[{"text":"What is Average Collection Period?"},{"text":"Average Collection Period Formula"},{"text":"Average Collection Period Example"},{"text":"Importance of Average Collection Period"},{"text":"What is a Good Average Collection Period?"},{"text":"How to Improve Your Average Collection Period"}]},{"acf_fc_layout":"paragraph","content":"

Curious about other AR metrics could help boost your cash flow? Click below to download our free AR metrics spreadsheet and learn how to calculate the metrics that matter most to your business.

\n"},{"acf_fc_layout":"hubspot_cta","id":"ab85080f-1635-4491-b739-2e6fb6f385b7","alt":"Top 5 AR metrics "},{"acf_fc_layout":"space_block"},{"acf_fc_layout":"heading","text":"What is Average Collection Period?","level":"h2"},{"acf_fc_layout":"paragraph","content":"

The average collection period is a financial metric that measures the average number of days it takes for a business to collect payments from customers after a credit sale. It shows how long your accounts receivable remain outstanding before being converted into cash.

\n"},{"acf_fc_layout":"paragraph","content":"

This metric plays an important role in understanding your cash flow cycle and evaluating how efficiently your business manages collections. A shorter average collection period generally indicates that customers are paying on time and that your collections process is effective. A longer period may suggest delays in payments, lenient credit terms, or inefficiencies in your receivables process.

\n"},{"acf_fc_layout":"paragraph","content":"

By tracking your average collection period over time, you can identify trends in customer payment behavior and take action to improve how quickly your business gets paid.

\n"},{"acf_fc_layout":"heading","text":"Average Collection Period vs Accounts Receivable Turnover","level":"h3"},{"acf_fc_layout":"paragraph","content":"

The average collection period and accounts receivable turnover are closely related metrics that measure how efficiently a business collects payments, but they present the information in different ways.

\n"},{"acf_fc_layout":"paragraph","content":"

The average collection period shows the number of days it takes to collect receivables, while the accounts receivable turnover ratio shows how many times receivables are collected during a specific period.

\n"},{"acf_fc_layout":"table_block","paste_table":"","caption":"","is_first_column_header":false,"header_cells":[{"content":"Metric","align":"left","colspan":"1"},{"content":"What it measures","align":"left","colspan":"1"}],"rows":[{"cells":[{"content":"Average Collection Period","align":"left","colspan":"1"},{"content":"Time it takes to collect payments, expressed in days","align":"left","colspan":"1"}]},{"cells":[{"content":"Accounts Receivable Turnover","align":"left","colspan":"1"},{"content":"Number of times receivables are collected during a period","align":"left","colspan":"1"}]}],"style":false},{"acf_fc_layout":"paragraph","content":"

These two metrics are inversely related. As your accounts receivable turnover increases, your average collection period decreases, meaning you are collecting payments more quickly.

\n"},{"acf_fc_layout":"paragraph","content":"

Using both metrics together gives you a more complete view of your collections performance. The average collection period provides a clear, time-based measure, while the turnover ratio offers a broader view of collection efficiency.

\n"},{"acf_fc_layout":"space_block"},{"acf_fc_layout":"heading","text":"Average Collection Period Formula","level":"h2"},{"acf_fc_layout":"paragraph","content":"

The average collection period calculates how long it takes, on average, for your business to collect payments after a credit sale. It is typically expressed in days, making it easier to understand how quickly cash is coming in.

\n"},{"acf_fc_layout":"paragraph","content":"

The standard formula is:

\n"},{"acf_fc_layout":"image","image":"https://cms.upflow.dev.3codes.io/wp-content/uploads/2026/04/Avg-collection-period-formula-2.png","caption":""},{"acf_fc_layout":"paragraph","content":"

In this formula, average accounts receivable is calculated by taking the beginning and ending receivables for a period and dividing by two. Net credit sales include all sales made on credit, excluding returns and allowances.

\n"},{"acf_fc_layout":"paragraph","content":"

This version of the formula gives you a direct view of how your receivables relate to your sales, translated into the number of days it takes to collect payment.

\n"},{"acf_fc_layout":"paragraph","content":"

There is also a simplified way to calculate the average collection period if you already know your accounts receivable turnover ratio.

\n"},{"acf_fc_layout":"image","image":"https://cms.upflow.dev.3codes.io/wp-content/uploads/2026/04/Avg-collection-period-formula-3.png","caption":""},{"acf_fc_layout":"paragraph","content":"

This version converts the turnover ratio into days, making it easier to interpret your collections performance. A lower number of days indicates faster collections, while a higher number suggests it takes longer to receive payments.

\n"},{"acf_fc_layout":"paragraph","content":"

Want to skip the formulas and calculate your average collection period and AR turnover instantly? Click on the banner below

\n"},{"acf_fc_layout":"hubspot_cta","id":"61e56bac-63b6-456a-915e-6ab17e0e46ed","alt":"AR Turnover Calculator"},{"acf_fc_layout":"space_block"},{"acf_fc_layout":"heading","text":"Average Collection Period Example","level":"h2"},{"acf_fc_layout":"paragraph","content":"

To understand how the average collection period works in practice, let’s walk through a simple example.

\n"},{"acf_fc_layout":"paragraph","content":"

Assume your business generated $100,000 in net credit sales over the year. Your accounts receivable balance at the beginning of the year was $8,000, and at the end of the year it was $12,000.

\n"},{"acf_fc_layout":"paragraph","content":"

First, calculate your average accounts receivable:

\n"},{"acf_fc_layout":"paragraph","content":"

(8,000+12,000)/2=10,000

\n"},{"acf_fc_layout":"paragraph","content":"

Next, apply the formula:

\n"},{"acf_fc_layout":"paragraph","content":"

(10,000/100,000)×365=36.5

\n"},{"acf_fc_layout":"paragraph","content":"

This means your average collection period is 36.5 days.

\n"},{"acf_fc_layout":"paragraph","content":"

In other words, it takes your business about 36.5 days on average to collect payment from customers after a credit sale.

\n"},{"acf_fc_layout":"paragraph","content":"

You can also arrive at the same result using the accounts receivable turnover ratio. If your turnover ratio is 10, dividing 365 by 10 gives you the same 36.5 days.

\n"},{"acf_fc_layout":"paragraph","content":"

Looking at the average collection period in this way gives you a clear, time-based view of how quickly your business is converting receivables into cash.

\n"},{"acf_fc_layout":"space_block"},{"acf_fc_layout":"heading","text":"Importance of Average Collection Period","level":"h2"},{"acf_fc_layout":"paragraph","content":"

The average collection period is an important indicator of how efficiently your business converts credit sales into cash. It directly impacts your liquidity, collections performance, and overall financial stability.

\n"},{"acf_fc_layout":"ordered_list","items":[{"text":"Cash flow management: The average collection period shows how quickly your business can turn credit sales into cash. A shorter period supports stronger liquidity and reduces reliance on invoice financing."},{"text":"Credit policy assessment: Tracking this metric helps you evaluate whether your credit terms are too strict or too lenient. A longer collection period may indicate relaxed terms or delays in collections, while a shorter period reflects tighter credit control and efficient processes."},{"text":"Insights into customer payment behavior: Monitoring the average collection period helps you identify patterns in how customers pay. It can highlight consistent delays or high-risk accounts, allowing you to adjust your customer financial relationship strategies accordingly."},{"text":"Benchmarking against industry standards: Comparing your collection period against industry averages helps you understand where you stand. Falling behind peers can signal inefficiencies in your collections process or gaps in your credit policies."},{"text":"Forecasting and budgeting: A predictable average collection period makes it easier to plan your cash inflows. This improves cash flow forecasting and helps ensure funds are available for expenses, investments, and growth."}]},{"acf_fc_layout":"space_block"},{"acf_fc_layout":"heading","text":"What is a Good Average Collection Period?","level":"h2"},{"acf_fc_layout":"paragraph","content":"

A good average collection period depends on your industry and payment terms. In general, a shorter collection period is preferred, as it indicates that your business is collecting payments efficiently and maintaining strong cash flow.

\n"},{"acf_fc_layout":"paragraph","content":"

As a rule of thumb, your average collection period should be close to your agreed payment terms. For example, if your terms are 30 days, collecting within 30 to 45 days is typically considered healthy.

\n"},{"acf_fc_layout":"paragraph","content":"

What qualifies as a good average collection period can vary significantly by industry. To benchmark performance, many businesses look at median DSO, a closely related metric. In our State of B2B Payments report, as shown below:

\n"},{"acf_fc_layout":"image","image":"https://cms.upflow.dev.3codes.io/wp-content/uploads/2025/12/DSO-by-Industry-1.png","caption":""},{"acf_fc_layout":"paragraph","content":"

We found that traditional industries like Office & Facilities Management and Consulting tend to have longer collection periods, often aligned with 60 to 90-day payment terms. In contrast, sectors like Clothing, Accessories, and Home Goods report shorter collection periods due to faster inventory cycles and stricter payment enforcement.

\n"},{"acf_fc_layout":"paragraph","content":"

These differences are often driven by how businesses operate. Companies that rely on physical inventory can enforce payments more easily, while service-based industries may face more challenges in collecting on time.

\n"},{"acf_fc_layout":"paragraph","content":"

Ultimately, a good average collection period is one that aligns with your payment terms and compares favorably against your industry benchmarks.

\n"},{"acf_fc_layout":"space_block"},{"acf_fc_layout":"heading","text":"How to Improve Your Average Collection Period?","level":"h2"},{"acf_fc_layout":"paragraph","content":"

Here are five strategies to reduce your average collection period and get paid faster:

\n"},{"acf_fc_layout":"ordered_list","items":[{"text":"Implement a consistent invoicing system: Set clear and predictable billing schedules so customers know when and how they’ll be invoiced. This helps them plan their payments and reduces delays."},{"text":"Streamline invoices for clarity: Make sure invoices are easy to read and clearly outline each charge. Clear invoices reduce confusion and help customers review and approve payments more quickly."},{"text":"Automate payment reminders: Use automated, account-level reminders to keep customers informed of outstanding balances. This makes it easier for them to take action and settle payments on time. You can streamline this process by using a financial CRM like Upflow."},{"text":"Offer flexible payment options: Provide multiple payment methods, including online options, so customers can pay as soon as they receive an invoice. Flexible terms can also encourage faster payments."},{"text":"Incentivize early payments: Offer discounts for early payments to encourage customers to settle invoices ahead of the due date. This can help offset delays and improve overall cash flow."}]},{"acf_fc_layout":"paragraph","content":"

Applying these strategies consistently can help shorten your average collection period, leading to improved cash flow and stronger financial stability.

\n"},{"acf_fc_layout":"hubspot_cta","id":"eed4ccd6-5fb9-494d-8bba-c73d99199d77","alt":"discover"},{"acf_fc_layout":"space_block"},{"acf_fc_layout":"heading","text":"FAQs","level":"h2"},{"acf_fc_layout":"article_faq","items":[{"question":"What is Average Collection Period?","answer":"

The average collection period is the average number of days it takes a business to collect payment from customers after a credit sale. It measures how quickly accounts receivable are converted into cash and reflects the efficiency of your collections process.

\n"},{"question":"What is the Average Collection Period Formula?","answer":"

The average collection period formula is:

Average Collection Period = Average Accounts Receivable/Net Credit Sales* 365
\n
\nIt can also be calculated by dividing 365 by your accounts receivable turnover ratio.

\n"},{"question":"How do you calculate average collection period?","answer":"

To calculate the average collection period, first determine your average accounts receivable by averaging the beginning and ending balances. Then divide that number by your net credit sales and multiply by 365. This gives you the average number of days it takes to collect payment.

\n"},{"question":"What is a good average collection period?","answer":"

A good average collection period depends on your industry and payment terms. In general, it should be close to your agreed payment terms. A shorter period indicates faster collections, while a longer period may signal delays or inefficiencies in your collections process.

\n"},{"question":"What is the difference between average collection period and DSO?","answer":"

Average collection period and days sales outstanding both measure how long it takes to collect payments. They are often used interchangeably, though DSO is typically used in reporting contexts. Both metrics provide a time-based view of how quickly receivables are converted into cash.

\n"},{"question":"What does a short or long average collection period indicate?","answer":"

A short average collection period indicates that customers are paying quickly and that your collections process is efficient. A long period may suggest delayed payments, lenient credit terms, or issues in your collections process that could impact cash flow.

\n"},{"question":"How can you improve your average collection period?","answer":"

To improve your average collection period, focus on reducing the time it takes to get paid. This can include sending clear invoices, setting consistent payment terms, automating reminders, offering flexible payment options, and following up on overdue accounts.

\n"},{"question":"Can you calculate average collection period without credit sales data?","answer":"

You can estimate the average collection period using total sales if credit sales data is not available, but this is less accurate. Including cash sales can make the collection period appear shorter than it actually is, so using net credit sales provides more reliable insights.

\n"}]}],"primary_category":{"term_id":374,"name":"AR metrics","slug":"ar-metrics","term_group":0,"term_taxonomy_id":97,"taxonomy":"category","description":"Tracking your receivable KPIs is crucial to mesure the efficiency of your cash collection. But which metric should you track? And how can you calculate and improve them? Have a look at our dedicated articles.","parent":0,"count":27,"filter":"raw"},"right_sidebar_call_to_action_id":"c8d30ba4-2773-4ffb-9cc3-1ae2d3d5a980","right_sidebar_call_to_action_alt":"Average Collection Period Spreadsheet","related_author_id":10617,"date_modified":"28/07/2026","og_image":false,"og_title":"","og_description":"","canonical_mode":"auto","x_default_mode":"auto","noindex":false,"nofollow":false,"_taxonomies":{"category":[{"id":374,"name":"AR metrics","slug":"ar-metrics","description":"Tracking your receivable KPIs is crucial to mesure the efficiency of your cash collection. But which metric should you track? And how can you calculate and improve them? Have a look at our dedicated articles.","parent":null}],"translation_priority":[{"id":11,"name":"Optional","slug":"optional","description":"","parent":null}]}},"publishedAt":"April 10, 2026","publishedAtIso":"2026-04-10T02:00:00Z","modifiedAtIso":"$undefined"},{"title":"Accounts Receivable Turnover Ratio: Formula & Calculation","description":"Learn how to calculate AR turnover with step by step guidance, examples, and practical tips to improve collections and strengthen cash flow.","image":"https://cms.upflow.dev.3codes.io/wp-content/uploads/2026/04/accounts-receivable-turnover-ratio.png","imageAlt":"","fields":{"link":"/blog/ar-metrics/accounts-receivable-turnover-ratio","_taxonomies":{"article_type":[{"id":374,"name":"AR metrics","slug":"ar-metrics","description":""}]},"author":{"name":"Alexandre Antoine","image":"https://cms.upflow.dev.3codes.io/wp-content/uploads/2026/07/9-1.png","description":"

\n","position":"Finance Director at Upflow","slug":"alex-finance-director"}},"acf":{"seo_title":"Accounts Receivable Turnover Ratio: Formula & Calculation","seo_description":"Learn how to calculate AR turnover with step by step guidance, examples, and practical tips to improve collections and strengthen cash flow.","body":[{"acf_fc_layout":"paragraph","content":"

Accounts receivable turnover is a key financial metric that shows how efficiently your business collects payments from customers. It helps you understand how quickly your credit sales are converted into cash, making it essential for managing cash flow, evaluating credit policies, and maintaining financial stability. By tracking this ratio over time, you can identify gaps in your collections process and uncover opportunities to get paid faster.

\n"},{"acf_fc_layout":"paragraph","content":"

Whether you are looking to improve your collections efficiency or simply understand how this metric works, having a clear grasp of accounts receivable turnover can make a meaningful impact on your business operations. Continue reading to discover:

\n"},{"acf_fc_layout":"bullet_list","items":[{"text":"What is the Accounts Receivable Turnover Ratio?"},{"text":"The Accounts Receivable Turnover Formula"},{"text":"How to Calculate Accounts Receivable Turnover"},{"text":"Accounts Receivable Turnover Example"},{"text":"Importance of the Accounts Receivable Turnover Ratio"},{"text":"What’s a Good Accounts Receivable Turnover Ratio?"},{"text":"How to Improve Your Accounts Receivable Turnover?"}]},{"acf_fc_layout":"paragraph","content":"

Want to calculate your AR turnover now? Click on the banner below

\n"},{"acf_fc_layout":"hubspot_cta","id":"61e56bac-63b6-456a-915e-6ab17e0e46ed","alt":"AR Turnover Calculator"},{"acf_fc_layout":"space_block"},{"acf_fc_layout":"heading","text":"What is the Accounts Receivable Turnover Ratio?","level":"h2"},{"acf_fc_layout":"paragraph","content":"

The accounts receivable turnover ratio measures how efficiently your business collects payments from customers who buy on credit. It shows how many times, over a specific period, your accounts receivable are converted into cash.

\n"},{"acf_fc_layout":"paragraph","content":"

In simple terms, it tells you how quickly your company gets paid.

\n"},{"acf_fc_layout":"paragraph","content":"

A higher accounts receivable turnover ratio means your business collects payments faster, which supports strong cash flow and liquidity. A lower ratio suggests that payments take longer to come in, which can put pressure on your cash flow and may point to issues in your credit policies or collections process.

\n"},{"acf_fc_layout":"paragraph","content":"

Because it directly reflects how quickly revenue turns into cash, this metric is widely used to evaluate the effectiveness of your accounts receivable management.

\n"},{"acf_fc_layout":"heading","text":"Importance of the Accounts Receivable Turnover Ratio","level":"h3"},{"acf_fc_layout":"paragraph","content":"

The accounts receivable turnover ratio is a key indicator of your company’s financial health and operational efficiency.

\n"},{"acf_fc_layout":"paragraph","content":"

First, it provides visibility into your cash flow. Faster collections mean more cash available to cover expenses, invest in growth, and reduce reliance on external financing.

\n"},{"acf_fc_layout":"paragraph","content":"

Second, it helps you evaluate your credit policies. If your turnover ratio is low, it may indicate that your payment terms are too lenient or that customers are consistently paying late. A higher ratio often reflects tighter credit control and better payment discipline.

\n"},{"acf_fc_layout":"paragraph","content":"

Third, it highlights how efficient your collections process is. Monitoring this metric over time can help you identify slowdowns, spot trends in customer behavior, and take action before issues escalate.

\n"},{"acf_fc_layout":"paragraph","content":"

Finally, it allows you to benchmark performance. Comparing your ratio against past periods or industry standards can help you understand whether your collections process is improving or falling behind.

\n"},{"acf_fc_layout":"heading","text":"Accounts Receivable Turnover vs DSO","level":"h3"},{"acf_fc_layout":"paragraph","content":"

Accounts receivable turnover ratio and days sales outstanding, or DSO, are closely related but provide different perspectives.

\n"},{"acf_fc_layout":"paragraph","content":"

The accounts receivable turnover ratio shows how many times receivables are collected during a period. DSO converts that information into the average number of days it takes to get paid.

\n"},{"acf_fc_layout":"paragraph","content":"

While turnover gives you a frequency, DSO gives you a time-based view. For example, a high turnover ratio corresponds to a lower DSO, meaning customers pay more quickly.

\n"},{"acf_fc_layout":"paragraph","content":"

DSO is often easier to interpret because it translates collections into days, but both metrics are useful. Together, they give a more complete picture of how efficiently your business collects payments.

\n"},{"acf_fc_layout":"heading","text":"Accounts Receivable Turnover vs Average Collection Period","level":"h3"},{"acf_fc_layout":"paragraph","content":"

The average collection period is another way to express how long it takes to collect receivables, and it is directly derived from the accounts receivable turnover ratio.

\n"},{"acf_fc_layout":"paragraph","content":"

While the turnover ratio shows how many times receivables are collected during a period, the average collection period shows the average number of days it takes to receive payment.

\n"},{"acf_fc_layout":"paragraph","content":"

These two metrics are inversely related. As your turnover ratio increases, your average collection period decreases, meaning you are collecting cash more quickly.

\n"},{"acf_fc_layout":"paragraph","content":"

Using both metrics together can help you better understand your collections performance. The turnover ratio provides a high-level view, while the average collection period offers a more intuitive measure in days that can be easier to track and communicate across teams.

\n"},{"acf_fc_layout":"space_block"},{"acf_fc_layout":"heading","text":"Accounts Receivable Turnover Formula","level":"h2"},{"acf_fc_layout":"paragraph","content":"

The accounts receivable turnover ratio measures how efficiently your business collects credit sales over a given period. You calculate it by dividing net credit sales by your average accounts receivable.

\n"},{"acf_fc_layout":"image","image":"https://cms.upflow.dev.3codes.io/wp-content/uploads/2026/04/ar-turnover-formula.png","caption":""},{"acf_fc_layout":"paragraph","content":"

Net credit sales refers to the total sales made on credit during the period, excluding any returns or allowances. Average accounts receivable is calculated by taking the beginning and ending receivables for the period and dividing by two.

\n"},{"acf_fc_layout":"paragraph","content":"

This formula tells you how many times your receivables are converted into cash within the selected time frame. It is typically calculated on an annual basis, though shorter periods can also be used depending on your reporting needs.

\n"},{"acf_fc_layout":"paragraph","content":"

Another way to express this metric is by converting the turnover ratio into the average number of days it takes to collect payment. This is known as the average collection period.

\n"},{"acf_fc_layout":"image","image":"https://cms.upflow.dev.3codes.io/wp-content/uploads/2026/04/Avg-collection-period-formula-3.png","caption":""},{"acf_fc_layout":"paragraph","content":"

This version makes the metric easier to interpret by showing how long, on average, it takes to get paid. A lower number of days indicates faster collections, while a higher number suggests delays in receiving payments.

\n"},{"acf_fc_layout":"space_block"},{"acf_fc_layout":"heading","text":"How to Calculate Accounts Receivable Turnover","level":"h2"},{"acf_fc_layout":"paragraph","content":"

Calculating the accounts receivable turnover ratio helps you understand how efficiently your business collects payments from customers over a given period. While the formula itself is straightforward, it is important to use the right inputs to get an accurate result.

\n"},{"acf_fc_layout":"paragraph","content":"

To calculate your accounts receivable turnover ratio, follow these steps:

\n"},{"acf_fc_layout":"heading","text":"1. Determine your net credit sales","level":"h3"},{"acf_fc_layout":"paragraph","content":"

Start by identifying your total credit sales for the period you are analyzing. This should exclude any cash sales, returns, or allowances. Using net credit sales ensures you are only measuring revenue that actually needs to be collected.

\n"},{"acf_fc_layout":"heading","text":"2. Calculate average accounts receivable","level":"h3"},{"acf_fc_layout":"paragraph","content":"

Next, find your average accounts receivable for the same period. You can do this by taking the accounts receivable balance at the beginning of the period and at the end of the period, then dividing by two.

\n"},{"acf_fc_layout":"paragraph","content":"

This gives you a more balanced view of your receivables over time rather than relying on a single point.

\n"},{"acf_fc_layout":"heading","text":"3. Divide net credit sales by average accounts receivable","level":"h3"},{"acf_fc_layout":"paragraph","content":"

Once you have both figures, divide net credit sales by average accounts receivable. The result tells you how many times your business collected its receivables during that period.

\n"},{"acf_fc_layout":"heading","text":"4. Choose the right time frame","level":"h3"},{"acf_fc_layout":"paragraph","content":"

Most companies calculate accounts receivable turnover on an annual basis, but you can also calculate it monthly or quarterly depending on your reporting needs. Shorter time frames can help you spot changes in collection performance more quickly.

\n"},{"acf_fc_layout":"heading","text":"5. Keep calculations consistent over time","level":"h3"},{"acf_fc_layout":"paragraph","content":"

To make meaningful comparisons, use the same method and time period each time you calculate the ratio. This allows you to track trends and identify whether your collections process is improving or slowing down.

\n"},{"acf_fc_layout":"paragraph","content":"

By calculating your accounts receivable turnover regularly, you gain a clearer view of how quickly your business converts credit sales into cash. This makes it easier to monitor performance and take action when needed.

\n"},{"acf_fc_layout":"space_block"},{"acf_fc_layout":"heading","text":"Accounts Receivable Turnover Example","level":"h2"},{"acf_fc_layout":"paragraph","content":"

To better understand how the accounts receivable turnover ratio works, let’s look at a simple example.

\n"},{"acf_fc_layout":"paragraph","content":"

Assume your business generated $100,000 in net credit sales over the year. At the beginning of the year, your accounts receivable balance was $8,000, and at the end of the year, it was $12,000.

\n"},{"acf_fc_layout":"paragraph","content":"

First, calculate your average accounts receivable:

\n"},{"acf_fc_layout":"paragraph","content":"

(8,000+12,000)/2=10,000

\n"},{"acf_fc_layout":"paragraph","content":"

Next, divide your net credit sales by your average accounts receivable:

\n"},{"acf_fc_layout":"paragraph","content":"

100,000/10,000=10

\n"},{"acf_fc_layout":"paragraph","content":"

This means your accounts receivable turnover ratio is 10. In other words, your business collected its average receivables 10 times over the course of the year.

\n"},{"acf_fc_layout":"paragraph","content":"

You can also translate this into the average number of days it takes to collect payment:

\n"},{"acf_fc_layout":"paragraph","content":"

365/10=36.5 days

\n"},{"acf_fc_layout":"paragraph","content":"

In this example, it takes your business approximately 36.5 days on average to collect payment from customers.

\n"},{"acf_fc_layout":"paragraph","content":"

Looking at both the turnover ratio and the collection period together gives you a clearer picture of how efficiently your business is converting credit sales into cash.

\n"},{"acf_fc_layout":"paragraph","content":"

Click on the banner below to download our free AR turnover calculator spreadsheet

\n"},{"acf_fc_layout":"hubspot_cta","id":"61e56bac-63b6-456a-915e-6ab17e0e46ed","alt":"AR Turnover Calculator"},{"acf_fc_layout":"space_block"},{"acf_fc_layout":"heading","text":"Importance of the Accounts Receivable Turnover Ratio","level":"h2"},{"acf_fc_layout":"paragraph","content":"

The Accounts Receivable Turnover Ratio is a crucial financial metric that reflects how efficiently a company collects cash from its customers and manages credit sales. Here’s why it matters:

\n"},{"acf_fc_layout":"ordered_list","items":[{"text":"Cash Flow Health: A high receivable turnover ratio indicates a steady inflow of cash, which is essential for meeting short-term obligations, reinvesting in operations, and supporting business growth. Timely collections reduce reliance on invoice financing and improve overall liquidity."},{"text":"Credit Policy Evaluation: This ratio helps assess the effectiveness of a company’s credit policies. A lower turnover ratio might suggest lenient credit terms or challenges in collections, whereas a higher ratio often reflects stricter credit management and disciplined payment terms."},{"text":"Operational Efficiency: The turnover ratio offers insight into a company’s operational efficiency. Efficient collection processes contribute to a higher turnover ratio, showing that the business can quickly convert sales into cash, which in turn enhances working capital."},{"text":"Customer Payment Behavior Insights: Tracking this ratio over time can help identify patterns in customer payment habits. If the ratio declines, it might signal issues such as delayed payments, necessitating further analysis or adjustments in customer credit limits or payment terms."},{"text":"Benchmarking and Competitive Positioning: Comparing the accounts receivable turnover ratio with industry peers provides perspective on where a company stands in terms of credit and collections. A stronger turnover ratio often indicates a competitive edge in cash flow management and financial stability, which can be advantageous for investor confidence and market positioning."}]},{"acf_fc_layout":"space_block"},{"acf_fc_layout":"heading","text":"What’s a Good Accounts Receivable Turnover Ratio?","level":"h2"},{"acf_fc_layout":"paragraph","content":"

There’s no perfect answer for what’s a good versus bad receivables turnover ratio.

\n"},{"acf_fc_layout":"paragraph","content":"

A desirable AR turnover ratio is generally high. That indicates a short collection period and that you have an efficient and effective collection process.

\n"},{"acf_fc_layout":"paragraph","content":"

A lower ratio could indicate that your company is liberal with extending credit and/or inefficient at collections. Generally, the higher ratio indicates a more fiscally stable and responsible company, but you may decide a lower ratio is OK to capture sales ahead of competitors or keep customers in tough economic conditions.

\n"},{"acf_fc_layout":"paragraph","content":"

What makes a good ratio varies widely by industry, as well. To give you a benchmark, here are recorded ratios by industry sector, reported by CSIMarket.com:

\n"},{"acf_fc_layout":"image","image":"https://cms.upflow.dev.3codes.io/wp-content/uploads/2026/04/Receivable-Turnover-Chart-selection-1.png","caption":""},{"acf_fc_layout":"paragraph","content":"

Within your own company, think less about “what is a good or bad number,” and focus more on the trend. If your ratio dips suddenly or consistently drops each month or year, take a look at your collections processes to find opportunities to improve efficiency.

\n"},{"acf_fc_layout":"space_block"},{"acf_fc_layout":"heading","text":"How to Improve Your Accounts Receivable Turnover","level":"h2"},{"acf_fc_layout":"paragraph","content":"

To improve your accounts receivable turnover ratio, you simply have to shrink the amount of time it takes you to get paid.

\n"},{"acf_fc_layout":"paragraph","content":"

Some ways to improve your accounts receivable collections include:

\n"},{"acf_fc_layout":"bullet_list","items":[{"text":"Use a consistent invoicing system. Make sure customers know when to expect to be billed and how they’ll receive their invoice. This helps them plan for their cash flow and pay on time. "},{"text":"Create clear invoices. If customers can’t interpret their invoices, they’ll have a harder time paying what they owe on time. Make sure your invoices are clear, so they know what they’re looking at and can easily confirm the services you’re charging for."},{"text":"Simplify reminders. Spare customers a slew of reminders for every outstanding invoice, and create a system that sends reminders at the account level. That lets a customer see their full outstanding balance all in one place and easily pay at once."},{"text":"Offer flexible payment options. Make it easy for customers to pay on time by being flexible with your terms to meet their needs. Also offer multiple ways to receive payment, and make it easy to pay online as soon as they receive the invoice by using a Finance CRM"},{"text":"Offer early-payment discounts. Incentivize customers to pay invoices before they’re due by offering a discount. This encourages more customers to pay on time, and early payments can offset late payers and improve your A/R turnover."},{"text":"Be proactive about collections. Hire a dedicated person or team to handle accounts receivable and stay on top of communications regarding billing and collections, so this process doesn’t fall by the wayside."}]},{"acf_fc_layout":"paragraph","content":"

Use a dashboard for better visibility. A dashboard that automatically tracks and reports your accounts receivable metrics can help you easily see how your A/R turnover is trending. At Upflow, we offer solutions that let you see a real-time view of your accounts receivable metrics to improve your collections’ efficiency and make more accurate financial projections.

\n"},{"acf_fc_layout":"hubspot_cta","id":"eed4ccd6-5fb9-494d-8bba-c73d99199d77","alt":"Free plan discover upflow"},{"acf_fc_layout":"space_block"},{"acf_fc_layout":"heading","text":"FAQs","level":"h2"},{"acf_fc_layout":"article_faq","items":[{"question":"What is the Accounts Receivable Turnover Formula?","answer":"

The accounts receivable turnover formula is:

Accounts Receivable Turnover Ratio = Net Credit Sales / Average Accounts Receivable

Here, Net Credit Sales = The total sales made on credit during a specific period, excluding any returns or allowances.
\nAnd, Average Accounts Receivable = This sum of beginning and ending accounts receivable balances, divided by two.

\n"},{"question":"How do you calculate accounts receivable turnover ratio?","answer":"

To calculate the accounts receivable turnover ratio, divide your net credit sales by your average accounts receivable for a given period. First, determine your net credit sales. Then calculate your average receivables by averaging the beginning and ending balances. Dividing the two gives you the turnover ratio.

\n"},{"question":"What does a high or low AR turnover ratio indicate?","answer":"

A high AR turnover ratio generally indicates that your business has an efficient collections process and strong credit management. It means customers are paying their invoices quickly, which is great for cash flow. On the other hand, a low turnover ratio may suggest issues like lenient credit terms, customer payment delays, or an ineffective collection process. That can negatively affect your liquidity and signal financial instability.

\n"},{"question":"What is a good accounts receivable turnover ratio?","answer":"

A good accounts receivable turnover ratio depends on your industry and business model. In general, a higher ratio is preferred because it indicates faster collections. Rather than focusing on a specific number, it is more useful to track trends over time and compare your performance against industry benchmarks.

\n"},{"question":"What is the difference between accounts receivable turnover and DSO?","answer":"

Accounts receivable turnover shows how many times your receivables are collected during a period. DSO, or days sales outstanding, shows the average number of days it takes to collect payment. While turnover provides a frequency, DSO expresses the same concept in days, making it easier to interpret.

\n"},{"question":"How often should you calculate accounts receivable turnover?","answer":"

Most businesses calculate accounts receivable turnover annually, but it can also be calculated monthly or quarterly. Using shorter time frames helps you monitor changes in your collections process more closely and respond more quickly to issues.

\n"},{"question":"How can I improve my AR turnover Ratio?","answer":"

To improve your accounts receivable turnover ratio, focus on reducing the time it takes to get paid. This can include sending clear invoices, setting consistent payment terms, offering flexible payment options, and following up on overdue accounts. Improving visibility into your receivables and staying proactive with collections can also help drive faster payments.

\n"}]}],"primary_category":{"term_id":374,"name":"AR metrics","slug":"ar-metrics","term_group":0,"term_taxonomy_id":97,"taxonomy":"category","description":"Tracking your receivable KPIs is crucial to mesure the efficiency of your cash collection. But which metric should you track? And how can you calculate and improve them? Have a look at our dedicated articles.","parent":0,"count":27,"filter":"raw"},"right_sidebar_call_to_action_id":"e06ad477-71f9-4ba7-9188-1de4ff5ed1b5","right_sidebar_call_to_action_alt":"Free AR Turnover Calculator","related_author_id":10617,"date_modified":"28/07/2026","og_image":false,"og_title":"","og_description":"","canonical_mode":"auto","x_default_mode":"auto","noindex":false,"nofollow":false,"_taxonomies":{"category":[{"id":374,"name":"AR metrics","slug":"ar-metrics","description":"Tracking your receivable KPIs is crucial to mesure the efficiency of your cash collection. But which metric should you track? And how can you calculate and improve them? Have a look at our dedicated articles.","parent":null}],"translation_priority":[{"id":11,"name":"Optional","slug":"optional","description":"","parent":null}]}},"publishedAt":"April 9, 2026","publishedAtIso":"2026-04-09T02:00:00Z","modifiedAtIso":"$undefined"},{"title":"Days Sales in Accounts Receivable (AR): Formula & Meaning","description":"Learn what days sales in accounts receivable (AR) means, how to calculate it using the AR days formula, how to interpret it, and how to improve collections.","image":"https://cms.upflow.dev.3codes.io/wp-content/uploads/2026/04/days-sales-in-accounts-receivable-1.png","imageAlt":"","fields":{"link":"/blog/reduce-dso/days-sales-in-accounts-receivable","_taxonomies":{"article_type":[{"id":374,"name":"AR metrics","slug":"ar-metrics","description":""}]},"author":{"name":"Alexandre Antoine","image":"https://cms.upflow.dev.3codes.io/wp-content/uploads/2026/07/9-1.png","description":"

\n","position":"Finance Director at Upflow","slug":"alex-finance-director"}},"acf":{"seo_title":"Days Sales in Accounts Receivable (AR): Formula & Meaning","seo_description":"Learn what days sales in accounts receivable (AR) means, how to calculate it using the AR days formula, how to interpret it, and how to improve collections","body":[{"acf_fc_layout":"paragraph","content":"

Days Sales in Accounts Receivable, often shortened to AR Days, is a financial metric that measures the average number of days it takes a company to collect payment after making a credit sale. It is also commonly called Days Sales Outstanding (DSO), accounts receivable days, or debtor days.

\n"},{"acf_fc_layout":"paragraph","content":"

Tracking this metric helps businesses understand how efficiently they convert invoices into cash. A lower number usually means customers are paying faster, while a higher number can signal delays in collections, weaker cash flow, or issues in billing and follow-up processes. In this article, we’ll cover:

\n"},{"acf_fc_layout":"bullet_list","items":[{"text":"What is Days Sales in Accounts Receivable?"},{"text":"Days Sales in Accounts Receivable Formula"},{"text":"How to Interpret Days Sales in Accounts Receivable"},{"text":"Factors Affecting Days Sales in Accounts Receivable"},{"text":"Accounts Receivable Days by Industry"},{"text":"

How to Lower Your Days Sales in AR?

"}]},{"acf_fc_layout":"paragraph","content":"

Want to calculate your AR days now? Download our free AR Days/DSO calculator spreadsheet to calculate, interpret, and improve your AR days.

\n"},{"acf_fc_layout":"hubspot_cta","id":"3f44d79a-b614-418a-811b-1384592bac47","alt":"dso"},{"acf_fc_layout":"space_block"},{"acf_fc_layout":"heading","text":"What is Days Sales in Accounts Receivable?","level":"h2"},{"acf_fc_layout":"paragraph","content":"

Days Sales in Accounts Receivable measures the average number of days it takes your business to collect cash from customers after a credit sale. In practical terms, it tells you how long your money stays tied up in receivables before it reaches your bank account.

\n"},{"acf_fc_layout":"paragraph","content":"

This metric is important because it connects your sales activity to your cash flow reality. You may be generating revenue on paper, but if customers are slow to pay, your working capital can still come under pressure. That is why Days Sales in Accounts Receivable is one of the most important KPIs for finance and AR teams.

\n"},{"acf_fc_layout":"paragraph","content":"

You may also hear this metric referred to as:

\n"},{"acf_fc_layout":"bullet_list","items":[{"text":"Days Sales Outstanding (DSO)"},{"text":"Accounts Receivable Days"},{"text":"AR Days"},{"text":"Debtor Days"}]},{"acf_fc_layout":"paragraph","content":"

All of these terms describe the same concept: how quickly your company turns receivables into cash.

\n"},{"acf_fc_layout":"paragraph","content":"

A low Days Sales in AR usually means:

\n"},{"acf_fc_layout":"bullet_list","items":[{"text":"customers are paying on time,"},{"text":"your invoicing and collections processes are working well,"},{"text":"and your business has healthier cash flow."}]},{"acf_fc_layout":"paragraph","content":"

A high Days Sales in AR may suggest:

\n"},{"acf_fc_layout":"bullet_list","items":[{"text":"customers are paying late,"},{"text":"invoices are disputed or delayed,"},{"text":"payment terms are too long,"},{"text":"or your collections workflow needs improvement."}]},{"acf_fc_layout":"paragraph","content":"

For example, if your Days Sales in Accounts Receivable is 36.5 days, it means that on average, it takes your business a little over 36 days to collect payment after a sale is made on credit.

\n"},{"acf_fc_layout":"paragraph","content":"

Because of this, AR Days is more than just an accounting ratio. It is a direct indicator of collection efficiency, customer payment behavior, and overall cash flow health.

\n"},{"acf_fc_layout":"space_block"},{"acf_fc_layout":"heading","text":"Days Sales in Accounts Receivable Formula","level":"h2"},{"acf_fc_layout":"paragraph","content":"

There are two main ways to calculate Days Sales in Accounts Receivable:

\n"},{"acf_fc_layout":"ordered_list","items":[{"text":"the simple method, and"},{"text":"the countback method."}]},{"acf_fc_layout":"paragraph","content":"

The simple method is the most common formula used. The countback method is generally more accurate because it takes fluctuations in sales into account, but it is also more time-consuming to calculate manually.

\n"},{"acf_fc_layout":"paragraph","content":"

So, let’s look at both.

\n"},{"acf_fc_layout":"space_block"},{"acf_fc_layout":"heading","text":"Simple Days Sales in Accounts Receivable Formula ","level":"h3"},{"acf_fc_layout":"paragraph","content":"

The simple method is a very quick and straightforward way to calculate your accounts receivable days

\n"},{"acf_fc_layout":"paragraph","content":"

To calculate it, you need to divide your Accounts Receivable at the end of the period by your gross sales over the same period. You then multiply this number by the number of days in the period. The DSO or AR days Formula looks like this:

\n"},{"acf_fc_layout":"paragraph","content":""},{"acf_fc_layout":"image","image":"https://cms.upflow.dev.3codes.io/wp-content/uploads/2026/04/DSO-formula.png","caption":""},{"acf_fc_layout":"color_block","content":"

Let’s take a quick example:Using the simple method, your days in AR would be $200,000 / $2,000,000 * 365 = 36,5 days That means that over the year, it took your business 36,5 days on average to get paid.

\n"},{"acf_fc_layout":"paragraph","content":"

Depending on your industry, that might be a low DSO or a higher DSO than average. With time, you’ll get to know what your overall average DSO is and be able to spot any variation.

\n"},{"acf_fc_layout":"space_block"},{"acf_fc_layout":"heading","text":"The Countback Method for Calculating Days Sales in Accounts Receivable","level":"h3"},{"acf_fc_layout":"paragraph","content":"

The countback method is the more complex of the calculation formulas. With this method of days outstanding calculation, you go back to find exactly the amount of time it took your company to get paid.

\n"},{"acf_fc_layout":"paragraph","content":"

\n"},{"acf_fc_layout":"bullet_list","items":[{"text":"If your AR amount is higher than your sales amount for the month, you add the number of days in the month to your accounts receivable days or DSO calculation (you start at 0). When moving back a month, you subtract your gross sales from your A/R. "}]},{"acf_fc_layout":"bullet_list","items":[{"text":"If your gross sales are higher than your A/R amount, you calculate a day sales outstanding ratio. You divide your sales by your accounts receivable and then multiply this by X number of days in your month.
"}]},{"acf_fc_layout":"paragraph","content":"

You count back every month until you find your gross sales are higher than your A/R. Once you’ve added this month’s ratio to your DSO, you’re done! Your AR days or DSO is the amount of time you’ve added together by counting back.

Here’s an example to make the countback method formula more concrete:

\n"},{"acf_fc_layout":"table_block","paste_table":"","caption":"","is_first_column_header":false,"header_cells":[{"content":"Period","align":"left","colspan":"1"},{"content":"A/R","align":"left","colspan":"1"},{"content":"Gross Sales","align":"left","colspan":"1"},{"content":"DSO","align":"left","colspan":"1"}],"rows":[{"cells":[{"content":"May (31 days)","align":"left","colspan":"1"},{"content":"$$11,000","align":"left","colspan":"1"},{"content":"$$3,000","align":"left","colspan":"1"},{"content":"31 days","align":"left","colspan":"1"}]},{"cells":[{"content":"June (30 days)","align":"left","colspan":"1"},{"content":"$$8,000","align":"left","colspan":"1"},{"content":"$$1,000","align":"left","colspan":"1"},{"content":"30 + 31 = 61 days","align":"left","colspan":"1"}]},{"cells":[{"content":"July (31 days)","align":"left","colspan":"1"},{"content":"$$7,000","align":"left","colspan":"1"},{"content":"$$10,000","align":"left","colspan":"1"},{"content":"61 + 21 = 82 days","align":"left","colspan":"1"}]}],"style":false},{"acf_fc_layout":"paragraph","content":"$58"},{"acf_fc_layout":"heading","text":"Automating Your Accounts Receivable Days Calculation","level":"h4"},{"acf_fc_layout":"paragraph","content":"

So, what’s the most accurate and time-efficient way to calculate your days sales in accounts receivable? It’s using the countback method, but letting a tool do the calculation for you.

\n"},{"acf_fc_layout":"paragraph","content":"

You could use an automated AR software with extensive analytics and dashboards, like Upflow!

\n"},{"acf_fc_layout":"paragraph","content":"

At Upflow for example, we automatically calculate your AR days using the countback method when connecting your account with your invoicing solution. You can then track your DSO from your dashboard without having to think about calculating it yourself.

\n"},{"acf_fc_layout":"space_block"},{"acf_fc_layout":"heading","text":"How to Interpret Days Sales in Accounts Receivable","level":"h2"},{"acf_fc_layout":"paragraph","content":"

Once you calculate your result, the next step is understanding what it actually tells you.

\n"},{"acf_fc_layout":"paragraph","content":"

A high Days Sales in Accounts Receivable means your company is taking longer to collect payment after sales are made. This can create pressure on cash flow, reduce liquidity, and limit the capital available for payroll, suppliers, hiring, or growth initiatives.

\n"},{"acf_fc_layout":"paragraph","content":"

A low Days Sales in Accounts Receivable means you are collecting cash more quickly. In general, this is a sign of stronger collection performance and healthier working capital management.

\n"},{"acf_fc_layout":"paragraph","content":"

However, there is no universal “good” number. A healthy AR Days figure depends on:

\n"},{"acf_fc_layout":"bullet_list","items":[{"text":"your standard payment terms,"},{"text":"your customer mix,"},{"text":"your billing model,"},{"text":"and your industry."}]},{"acf_fc_layout":"paragraph","content":"

Here are the best ways to interpret your AR Days:

\n"},{"acf_fc_layout":"heading","text":"Compare it to your payment terms","level":"h3"},{"acf_fc_layout":"paragraph","content":"

If your standard terms are Net 30 and your AR Days is 55, that suggests many customers are paying well after the due date.

\n"},{"acf_fc_layout":"paragraph","content":"

If your standard terms are Net 60 and your AR Days is 52, your performance may actually be solid.

\n"},{"acf_fc_layout":"heading","text":"Compare it to your own historical trend","level":"h3"},{"acf_fc_layout":"paragraph","content":"

A single number is useful, but a trend is more useful.

\n"},{"acf_fc_layout":"paragraph","content":"

If your AR Days has increased from 38 to 49 to 57 over the last three quarters, that may indicate worsening collections performance, even if the number still looks acceptable in isolation.

\n"},{"acf_fc_layout":"heading","text":"Compare it to your industry","level":"h3"},{"acf_fc_layout":"paragraph","content":"

AR Days should always be interpreted in context. Industries with longer contractual cycles often have higher averages, while others are expected to collect much faster.

\n"},{"acf_fc_layout":"paragraph","content":"

That is why benchmarking against industry peers is one of the best ways to tell whether your result is healthy or needs attention.

\n"},{"acf_fc_layout":"paragraph","content":"

In short, Days Sales in Accounts Receivable is not just a reporting ratio. It is a practical indicator of your company’s cash conversion efficiency and a valuable signal of whether your credit and collections processes are supporting growth or holding it back.

\n"},{"acf_fc_layout":"space_block"},{"acf_fc_layout":"heading","text":"Factors Affecting Days Sales in Accounts Receivable","level":"h2"},{"acf_fc_layout":"paragraph","content":"

Several factors can influence your Days Sales in Accounts Receivable. Understanding them can help you identify why your AR Days is rising and what to improve.

\n"},{"acf_fc_layout":"heading","text":"1. Credit Terms","level":"h3"},{"acf_fc_layout":"paragraph","content":"

The payment terms you offer customers have a direct impact on AR Days. If you invoice on Net 30, your AR Days will naturally look different than if you invoice on Net 60 or Net 90.

\n"},{"acf_fc_layout":"paragraph","content":"

Longer terms may help you stay competitive, but they also delay cash collection.

\n"},{"acf_fc_layout":"heading","text":"2. Customer Payment Behavior","level":"h3"},{"acf_fc_layout":"paragraph","content":"

Some customers consistently pay on time. Others routinely pay late, regardless of the due date.

\n"},{"acf_fc_layout":"paragraph","content":"

If a large share of your customers delays payment, your Days Sales in AR will increase. Tracking payment behavior by segment or account can help you identify chronic late payers and adapt your follow-up strategy.

\n"},{"acf_fc_layout":"heading","text":"3. Invoice Accuracy and Timeliness","level":"h3"},{"acf_fc_layout":"paragraph","content":"

Late or inaccurate invoices create avoidable delays.

\n"},{"acf_fc_layout":"paragraph","content":"

Missing PO numbers, incorrect billing contacts, wrong amounts, or delayed invoice issuance can all push payment further out. Clear, accurate, and timely invoices are essential if you want to keep AR Days under control.

\n"},{"acf_fc_layout":"heading","text":"4. Internal Collection Processes","level":"h3"},{"acf_fc_layout":"paragraph","content":"

Your collections workflow matters just as much as your payment terms.

\n"},{"acf_fc_layout":"paragraph","content":"

If reminders are inconsistent, disputes are not handled quickly, or overdue accounts are not escalated early enough, AR Days can rise fast. Strong internal processes help shorten the time between invoicing and payment.

\n"},{"acf_fc_layout":"heading","text":"5. Industry Standards","level":"h3"},{"acf_fc_layout":"paragraph","content":"

Some industries simply collect more slowly than others.

\n"},{"acf_fc_layout":"paragraph","content":"

Businesses in sectors with long project cycles or standard 60- to 90-day terms often have higher AR Days than companies in retail-like or inventory-driven sectors. That is why it is important to compare your result to relevant benchmarks, not just a generic average.

\n"},{"acf_fc_layout":"space_block"},{"acf_fc_layout":"heading","text":"Accounts Receivable Days by Industry","level":"h2"},{"acf_fc_layout":"paragraph","content":"

To help you better interpret your AR days, we analysed the median AR Days of various industries in our State of B2B Payments report, as seen below:

\n"},{"acf_fc_layout":"image","image":"https://cms.upflow.dev.3codes.io/wp-content/uploads/2024/11/ar-days-by-Industry.png","caption":""},{"acf_fc_layout":"paragraph","content":"

The overall median AR days across industries stands at 56 days, but a closer examination reveals significant disparities. Some industries get paid faster than others. In traditional sectors such as Office & Facilities Management and Consulting, accounts receivable days tend to be much higher, with businesses often operating under 90-day payment terms. Even so, many companies at the median in Office & Facilities Management face challenges enforcing these terms. In contrast, organizations in the top 25th percentile of this sector, what we call ‘the best in Upflow’ achieve a DSO of 78 days, receiving payments well within their terms.

\n"},{"acf_fc_layout":"paragraph","content":"

On the other end, Clothing, Accessories, and Home businesses experience the lowest median DSO across all industries tracked by Upflow. This could be due to their reliance on physical inventory, which drives a need for quicker payment following a transaction. These businesses can also more easily enforce payment by controlling credit exposure, customers won’t receive new inventory until previous invoices are settled. This dynamic contrasts sharply with sectors like Office & Facilities Management, where the inability to ‘evict’ clients from their offices for non-payment makes it harder to enforce timely payments.

\n"},{"acf_fc_layout":"paragraph","content":"

Now that you know where your company stands with your days in AR or DSO, you can focus on improving this number.

\n"},{"acf_fc_layout":"space_block"},{"acf_fc_layout":"heading","text":"How to Lower Your Days Sales in AR?","level":"h2"},{"acf_fc_layout":"paragraph","content":"

1) Maintain an Efficient Invoicing Process

\n"},{"acf_fc_layout":"paragraph","content":"

Invoicing is crucial to any business, and an effective process can lower your days in AR. Be proactive: send invoices on time, set follow-up reminders, and ensure invoices include clear due dates, payment terms, and correct details. Even small mistakes, especially if you track manually, can delay payments and increase AR days.

\n"},{"acf_fc_layout":"paragraph","content":"

2) Create a Convenient Payment Process

\n"},{"acf_fc_layout":"paragraph","content":"

If customers struggle to pay, your DSO will suffer. Simplify the process by offering multiple payment options (e.g., bank transfer, card) and ensuring they have the right information, like payment links and due dates, on every invoice.

\n"},{"acf_fc_layout":"paragraph","content":"

3) Incentivize Early Payment

\n"},{"acf_fc_layout":"paragraph","content":"

Encourage early payments with discounts or bonuses. This strengthens your cash flow and customer relationships. Offering rewards is more effective than penalizing late payers, just ensure payment terms like Net 30 are clearly stated on your invoices.

\n"},{"acf_fc_layout":"paragraph","content":"

4) Automate Your AR Process

\n"},{"acf_fc_layout":"paragraph","content":"

To reduce AR days, automation is key. A/R software automates invoicing and reminders, letting you focus on high-risk accounts. Upflow provides real-time invoice tracking and multiple payment options, making it easier to streamline your process.

\n"},{"acf_fc_layout":"paragraph","content":"

5) Track Other Key Metrics

\n"},{"acf_fc_layout":"paragraph","content":"

Beyond days sales in accounts receivable, monitor AR aging reports to identify overdue accounts, your collection effectiveness index (CEI) to track payment success, and billing cohorts to evaluate how well your cash collection processes perform over time.

\n"},{"acf_fc_layout":"hubspot_cta","id":"eed4ccd6-5fb9-494d-8bba-c73d99199d77","alt":"Discover"},{"acf_fc_layout":"space_block"},{"acf_fc_layout":"heading","text":"FAQs","level":"h2"},{"acf_fc_layout":"article_faq","items":[{"question":"Is Days Sales in AR (Accounts Receivable) same as DSO?","answer":"

Yes. Days in AR, Days Sales in Accounts Receivable, Accounts Receivable Days, and Days Sales Outstanding (DSO) all refer to the same metric: the average number of days it takes to collect payment after a credit sale.

\n"},{"question":"What is the Days Sales in Accounts Receivable formula?","answer":"

The standard Days Sales in Accounts Receivable formula is:

AR Days = (Accounts Receivable / Gross Sales) x Number of Days

This formula is also commonly searched as the days sales in receivables formula, days sales in ar formula, or ar days formula.

\n"},{"question":"How do you calculate AR Days?","answer":"

There are two main ways to calculate AR Days:

– the simple method, which uses total receivables and total sales over a period,
\n– and the countback method, which works backward month by month and is generally more accurate.

\n"},{"question":"What is a good Days Sales in Accounts Receivable number?","answer":"

A good AR Days number depends on your industry, business model, and payment terms. In Upflow’s State of B2B Payments report, the overall median across industries is 56 days, but some sectors operate with much longer or shorter collection cycles.

\n"},{"question":"Why is my Days Sales in AR increasing?","answer":"

AR Days may rise because of slower customer payments, longer credit terms, invoice disputes, billing errors, or inefficient collections processes. A rising trend usually signals that cash is taking longer to come in.

\n"},{"question":"What is the difference between AR Days and Accounts Receivable Turnover?","answer":"

AR Days tells you the average number of days it takes to collect payment. Accounts Receivable Turnover tells you how many times receivables are collected during a period. They are related, but AR Days is often easier to interpret in cash flow terms.

\n"},{"question":"How often should you track Days Sales in Accounts Receivable?","answer":"

Most businesses should monitor AR Days at least monthly. Frequent tracking helps spot changes in payment behavior early and makes it easier to measure the impact of process improvements.

\n"},{"question":"Can Days Sales in Accounts Receivable be negative?","answer":"

No. Because the metric measures the time it takes to collect receivables after a sale, it cannot be negative. If your business receives payment before revenue is recognized, that is usually tracked through deferred revenue rather than AR Days.

\n"}]}],"primary_category":{"term_id":393,"name":"Reduce DSO","slug":"reduce-dso","term_group":0,"term_taxonomy_id":116,"taxonomy":"category","description":"DSO is a crucial metric to track: it indicates how long it takes you to get paid by your clients. The closer it is to your payment terms, the better. Here you'll find articles and resources to help you reduce your DSO and get your business on the right track.","parent":0,"count":9,"filter":"raw"},"related_author_id":10617,"right_sidebar_call_to_action_id":"","right_sidebar_call_to_action_alt":"","date_modified":"28/07/2026","og_image":false,"og_title":"","og_description":"","canonical_mode":"auto","x_default_mode":"auto","noindex":false,"nofollow":false,"_taxonomies":{"category":[{"id":374,"name":"AR metrics","slug":"ar-metrics","description":"Tracking your receivable KPIs is crucial to mesure the efficiency of your cash collection. But which metric should you track? And how can you calculate and improve them? Have a look at our dedicated articles.","parent":null},{"id":393,"name":"Reduce DSO","slug":"reduce-dso","description":"DSO is a crucial metric to track: it indicates how long it takes you to get paid by your clients. The closer it is to your payment terms, the better. Here you'll find articles and resources to help you reduce your DSO and get your business on the right track.","parent":null}],"translation_priority":[{"id":11,"name":"Optional","slug":"optional","description":"","parent":null}]}},"publishedAt":"April 1, 2026","publishedAtIso":"2026-04-01T02:00:00Z","modifiedAtIso":"$undefined"},{"title":"Aging Report: Meaning & Role in Accounts Receivable (AR)","description":"Learn how an accounts receivable aging report helps you track outstanding invoices and prioritize collections to improve cash flow.","image":"https://cms.upflow.dev.3codes.io/wp-content/uploads/2026/03/aging-reports-1.png","imageAlt":"","fields":{"link":"/blog/ar-metrics/aging-reports","_taxonomies":{"article_type":[{"id":374,"name":"AR metrics","slug":"ar-metrics","description":""}]},"author":{"name":"Alexandre Antoine","image":"https://cms.upflow.dev.3codes.io/wp-content/uploads/2026/07/9-1.png","description":"

\n","position":"Finance Director at Upflow","slug":"alex-finance-director"}},"acf":{"seo_title":"Aging Report: Meaning & Role in Accounts Receivable (AR)","seo_description":"Learn how an accounts receivable aging report helps you track outstanding invoices and prioritize collections to improve cash flow.","body":[{"acf_fc_layout":"paragraph","content":"

Aging report is one of the most important tools for managing accounts receivable and maintaining healthy cash flow.

\n"},{"acf_fc_layout":"paragraph","content":"

It helps you understand which invoices are unpaid, how long they have been outstanding and which customers require immediate follow-up. By organizing your receivables into a clear timeline, an aging report gives you full visibility into overdue payments and potential risks.

\n"},{"acf_fc_layout":"paragraph","content":"

Whether you are a small business owner or a finance leader, reviewing your accounts receivable aging report regularly allows you to prioritize collections, identify late-paying customers and make better credit decisions. In this guide, you will learn:

\n"},{"acf_fc_layout":"bullet_list","items":[{"text":"What is an Accounts Receivable (AR) Aging Report?"},{"text":"Why are Accounts Receivable (AR) Aging Reports Important?"},{"text":"What Is the Method for Aging of Accounts Receivables?"},{"text":"Automating Aging Reports"},{"text":"Benefits of an Accounts Receivable (AR) Aging Report"}]},{"acf_fc_layout":"paragraph","content":"

Need help calculating your accounts receivable aging? Click on the banner below to download our free accounts receivable aging template

\n"},{"acf_fc_layout":"hubspot_cta","id":"26042576-ffe8-4ece-a176-5a0fd12ad4d0","alt":"AR Aging Template"},{"acf_fc_layout":"space_block"},{"acf_fc_layout":"heading","text":"What is an Accounts Receivable (AR) Aging Report?","level":"h2"},{"acf_fc_layout":"paragraph","content":"

An accounts receivable aging report (AR aging report) is a financial report that shows how long customer invoices have been outstanding.

\n"},{"acf_fc_layout":"paragraph","content":"

Often referred to simply as an aging report, it groups unpaid invoices into time buckets, typically 0 to 30 days, 31 to 60 days, 61 to 90 days and 90+ days, so businesses can quickly identify overdue payments.

\n"},{"acf_fc_layout":"paragraph","content":"

This report includes key details such as customer names, invoice amounts, due dates and days past due, helping finance teams prioritize collections and monitor cash flow health.

\n"},{"acf_fc_layout":"paragraph","content":"

By reviewing an aging report regularly, businesses can spot late-paying customers, assess credit risk and take action before overdue invoices turn into bad debt.

\n"},{"acf_fc_layout":"paragraph","content":"

In simple terms, an aging report helps you understand who owes you money and how late they are.

\n"},{"acf_fc_layout":"space_block"},{"acf_fc_layout":"heading","text":"Why are Accounts Receivable (AR) Aging Reports Important?","level":"h2"},{"acf_fc_layout":"paragraph","content":"

An aging report is essential for maintaining healthy cash flow and staying in control of your receivables.

\n"},{"acf_fc_layout":"paragraph","content":"

Late payments are a growing challenge for businesses. A survey from Atradius found that late payments now account for 49% of all B2B sales, with an average collection time of 73 days. This delay can put pressure on working capital and disrupt day-to-day operations.

\n"},{"acf_fc_layout":"paragraph","content":"

An accounts receivable aging report gives you a clear snapshot of outstanding invoices, helping you quickly see which payments are overdue and which customers require immediate attention.

\n"},{"acf_fc_layout":"paragraph","content":"

Without an aging report, it becomes difficult to track unpaid invoices accurately, increasing the risk of missed follow-ups, poor visibility into cash flow and incorrect financial assumptions.

\n"},{"acf_fc_layout":"paragraph","content":"

At a high level, an AR aging report helps you:

\n"},{"acf_fc_layout":"bullet_list","items":[{"text":"Maintain visibility into your receivables timeline"},{"text":"Prioritize collection efforts based on urgency"},{"text":"Stay proactive instead of reacting to late payments"},{"text":"Reduce the risk of cash flow disruptions"}]},{"acf_fc_layout":"paragraph","content":"

By regularly reviewing your aging report, you can make informed decisions about collections, credit policies and customer relationships before issues escalate.

\n"},{"acf_fc_layout":"hubspot_cta","id":"eed4ccd6-5fb9-494d-8bba-c73d99199d77","alt":"webinar replay"},{"acf_fc_layout":"space_block"},{"acf_fc_layout":"heading","text":"What Is the Method for Aging of Accounts Receivables?","level":"h2"},{"acf_fc_layout":"paragraph","content":"

Creating an accounts receivable aging report is a straightforward process that helps you organize your receivables timeline and identify overdue invoices.

\n"},{"acf_fc_layout":"paragraph","content":"

An aging report works by grouping unpaid invoices based on how long they have been outstanding. These groups, often called aging buckets, typically follow a standard timeline such as:

\n"},{"acf_fc_layout":"bullet_list","items":[{"text":"0 to 30 days"},{"text":"31 to 60 days"},{"text":"61 to 90 days"},{"text":"90+ days"}]},{"acf_fc_layout":"paragraph","content":"

You can also include a “current” category for invoices that are not yet due. This helps you stay proactive by tracking upcoming payments and sending reminders before they become overdue.

\n"},{"acf_fc_layout":"heading","text":"How to create an aging report","level":"h3"},{"acf_fc_layout":"paragraph","content":"

Step 1: Review all open invoices
\nGather a complete list of unpaid invoices, including invoice dates, due dates and amounts.

\n"},{"acf_fc_layout":"paragraph","content":"

Step 2: Group invoices by customer
\nOrganizing invoices by customer helps you understand payment behavior and identify repeat late payers.

\n"},{"acf_fc_layout":"paragraph","content":"

Step 3: Assign invoices to aging buckets
\nPlace each invoice into a time bracket based on how long it has been outstanding within your receivables timeline.

\n"},{"acf_fc_layout":"paragraph","content":"

Step 4: Calculate totals
\nSum the outstanding amounts for each aging bucket and for each customer.

\n"},{"acf_fc_layout":"paragraph","content":"

Step 5: Prioritize overdue accounts
\nFocus on the oldest invoices first to reduce the risk of bad debt and improve cash flow.

\n"},{"acf_fc_layout":"paragraph","content":"

By structuring your receivables into a clear timeline, an aging report makes it easier to spot delays, take action and manage collections more effectively.

\n"},{"acf_fc_layout":"space_block"},{"acf_fc_layout":"heading","text":"Automating Aging Reports","level":"h2"},{"acf_fc_layout":"paragraph","content":"

While you can create an aging report manually, most businesses rely on automation to save time and reduce errors.

\n"},{"acf_fc_layout":"paragraph","content":"

An automated aging report updates your receivables timeline in real time, giving you instant visibility into outstanding invoices without the need for manual tracking.

\n"},{"acf_fc_layout":"paragraph","content":"

With accounts receivable software like Upflow, you can automatically:

\n"},{"acf_fc_layout":"bullet_list","items":[{"text":"Categorize invoices into aging buckets"},{"text":"Track changes in your receivables timeline"},{"text":"Segment customers based on payment behavior"},{"text":"

Generate accurate reports instantly

"}]},{"acf_fc_layout":"paragraph","content":"

Beyond reporting, automation helps you monitor key metrics such as DSO, aging balance and cash flow, all in one place.

\n"},{"acf_fc_layout":"paragraph","content":"

By automating your aging report, you improve accuracy, gain real-time insights and free up time to focus on collections and cash flow optimization.

\n"},{"acf_fc_layout":"space_block"},{"acf_fc_layout":"heading","text":"Benefits of an Accounts Receivable (AR) Aging Report","level":"h2"},{"acf_fc_layout":"paragraph","content":"

An accounts receivable aging report can be helpful in multiple ways. Besides giving you a better understanding of your aged receivables and letting you know about due payments. Here are ways you can make good use of aging reports:

\n"},{"acf_fc_layout":"heading","text":"1. Estimate Bad Debt Risks","level":"h3"},{"acf_fc_layout":"paragraph","content":"

Certain invoices are so long past the due date that you will not be able to collect them and will have to perform a write-off. There could be many more reasons a payment could be deemed uncollectible, like the payers being unable to pay back or other conditions. Such outstanding invoices are called bad debt and represent an total amount of loss you will be incurring. The IRS lets companies write off aged receivables, but only after they have decided to abandon efforts to collect the debt.

\n"},{"acf_fc_layout":"paragraph","content":"

For every accounting period, you need to keep track of these bad debts and estimate how much they cost your company. And you can use an aging report to get the accurate data required to do so.

\n"},{"acf_fc_layout":"paragraph","content":"

You can also further use the estimation of bad debt expenses to revise your policies that allow for leniency to doubtful customer accounts. For example, you can compare historical customer interactions, their past due payments, and how much bad debt the doubtful account has contributed to see if you need to revise the allowances you make.

\n"},{"acf_fc_layout":"paragraph","content":"

Typically, the longer your debts remain uncollected, the chances of them going uncollected forever will keep increasing. A periodic review of your aging reports helped by accounting software will give you the direction needed to ensure you keep bad debts under control.

\n"},{"acf_fc_layout":"paragraph","content":"

Calculate your % of bad debts with our free AR Aging Report spreadsheet

\n"},{"acf_fc_layout":"hubspot_cta","id":"26042576-ffe8-4ece-a176-5a0fd12ad4d0","alt":"AR Aging Template"},{"acf_fc_layout":"space_block"},{"acf_fc_layout":"heading","text":"2. Identify Cash Flow Issues ","level":"h3"},{"acf_fc_layout":"paragraph","content":"

To ensure the company’s financial health is sound, you must ensure that your customers pay you and are paying on time. According to Jessie Hagen, U.S. Bank, 82% of all companies fail because of cash flow mismanagement. Let us give you an example scenario: you get a massive order from a customer who does not pay upfront. So, you borrow money from investors or banks to acquire the supplies and go ahead with the product delivery.

\n"},{"acf_fc_layout":"paragraph","content":"

If the customer does not pay you back on time, you will end up with amounting interests that could negate any amount of profits you might get whether the customer ultimately pays you. You need to know when you can wait for payment before it leads to a loss. An aging report helps you identify such scenarios and keeps you continually aware of your company’s cash flow.

\n"},{"acf_fc_layout":"paragraph","content":"

Are late payments piling-up? Have a look at our free guide with tips to get paid on time!

\n"},{"acf_fc_layout":"heading","text":"3. Refine Your Company’s Accounts Receivable Collection Practices ","level":"h3"},{"acf_fc_layout":"paragraph","content":"

Sometimes, you don’t get paid on time because your customer has a different pay cycle than your company offers. In such cases, all you need to do is realign your service delivery or invoice date alerting mechanism to match their pay cycle, lessening the instances of late payments. An aging report helps you analyze such scenarios and evaluate your collections processes.

\n"},{"acf_fc_layout":"paragraph","content":"

If you have multiple old accounts that stretch beyond the 60 to 90 days time bracket, it means that your current collections strategy could be weak. Reminding your payment terms is a good place to start.

\n"},{"acf_fc_layout":"paragraph","content":"

You can improve your A/R collection by implementing new practices such as prioritizing your collection efforts, sending payment reminders for outstanding balances the first-day payment is late and adding in more in-person communications. Doing so will allow your company to maintain a healthy cash flow and avoid any potential cash flow problems.

\n"},{"acf_fc_layout":"paragraph","content":"

For more tips to improve your collection processes, check out our best practices to effectively manage AR.

\n"},{"acf_fc_layout":"heading","text":"4. Assess Your Credit Policies ","level":"h3"},{"acf_fc_layout":"paragraph","content":"

An Aging report is a good way to evaluate the effectiveness of your credit policy quickly. For instance, if most of your pending payments are from a single customer, it is quite obvious that there is an issue with this customer. In that case, you need to identify why they are delaying payments and potentially employ specific collection practices with that particular customer.

\n"},{"acf_fc_layout":"paragraph","content":"

But if you have multiple customers lagging behind on their payments, it could denote an underlying issue with your credit policy. You can note such scenarios and assess whether your credit risk is comparable to the actual industry standards.

\n"},{"acf_fc_layout":"heading","text":"5. Improve Inventory Management ","level":"h3"},{"acf_fc_layout":"paragraph","content":"

Aging accounts can also help deal with inventory by helping you assess when would be the right time to sell off with discounts and when to stockpile your inventory. In addition, you can compare the various costs related to warehousing, lost sales, retail space, and more so that you can plan for optimized inventory control that will cut down on unnecessary expenses.

\n"},{"acf_fc_layout":"paragraph","content":"

Want to gain additional insights on your financial analytics and improve your cash collection? Try our free plan: Discover Upflow!

\n"},{"acf_fc_layout":"hubspot_cta","id":"eed4ccd6-5fb9-494d-8bba-c73d99199d77","alt":"Free plan discover upflow"},{"acf_fc_layout":"heading","text":"FAQs","level":"h2"},{"acf_fc_layout":"article_faq","items":[{"question":"What does an aging report show?","answer":"

An aging report shows how long customer invoices have been outstanding. It groups unpaid invoices into time buckets such as 0 to 30 days, 31 to 60 days and 61 to 90 days, helping you identify overdue payments, prioritize collections and assess credit risk.

\n"},{"question":"How often should I review my AR aging report?","answer":"

You should review your aging report at least once a month. If you have a high volume of invoices or frequent late payments, a weekly or biweekly review is recommended. Regular monitoring helps you respond quickly to delays and maintain steady cash flow.

\n"},{"question":"What are the most common time buckets in an aging report?","answer":"

The most commonly used aging buckets are:

– 1 to 30 days overdue
\n– 31 to 60 days overdue
\n– 61 to 90 days overdue
\n– 90+ days overdue

You can customize these based on your industry or payment terms.

\n"},{"question":"How does an aging report help reduce bad debt?","answer":"

An aging report helps reduce bad debt by highlighting invoices that are significantly overdue. This allows you to prioritize follow-ups, adjust credit terms and take action before payments become uncollectible.

\n"},{"question":"What’s the difference between an AR and AP aging report?","answer":"

An accounts receivable aging report tracks money customers owe you, while an accounts payable aging report tracks money you owe suppliers. Both provide visibility into payment timelines, but from opposite sides of the balance sheet.

\n"},{"question":"Can I automate my aging reports?","answer":"

Yes, you can automate your aging report using accounts receivable software like Upflow. Automation keeps your receivables timeline updated in real time, reduces manual work and gives you accurate visibility into outstanding invoices and cash flow.

\n"}]}],"primary_category":{"term_id":374,"name":"AR metrics","slug":"ar-metrics","term_group":0,"term_taxonomy_id":97,"taxonomy":"category","description":"Tracking your receivable KPIs is crucial to mesure the efficiency of your cash collection. But which metric should you track? And how can you calculate and improve them? Have a look at our dedicated articles.","parent":0,"count":27,"filter":"raw"},"right_sidebar_call_to_action_id":"e38daf21-bb18-4e71-b8e0-0de115603d06","right_sidebar_call_to_action_alt":"Free AR Aging report","related_author_id":10617,"date_modified":"28/07/2026","og_image":false,"og_title":"","og_description":"","canonical_mode":"auto","x_default_mode":"auto","_taxonomies":{"category":[{"id":374,"name":"AR metrics","slug":"ar-metrics","description":"Tracking your receivable KPIs is crucial to mesure the efficiency of your cash collection. But which metric should you track? And how can you calculate and improve them? Have a look at our dedicated articles.","parent":null}],"translation_priority":[{"id":11,"name":"Optional","slug":"optional","description":"","parent":null}]}},"publishedAt":"March 27, 2026","publishedAtIso":"2026-03-27T01:00:00Z","modifiedAtIso":"$undefined"},{"title":"Days Sales Outstanding (DSO): Meaning & Interpretation","description":"Learn about the meaning of Days Sales Outstanding (DSO). Find out how to calculate, interpret, and enhance your DSO for better financial management.","image":"https://cms.upflow.dev.3codes.io/wp-content/uploads/2025/12/calculate-dso.png","imageAlt":"","fields":{"link":"/blog/reduce-dso/calculate-dso","_taxonomies":{"article_type":[{"id":374,"name":"AR metrics","slug":"ar-metrics","description":""}]},"author":{"name":"Alexandre Antoine","image":"https://cms.upflow.dev.3codes.io/wp-content/uploads/2026/07/9-1.png","description":"

\n","position":"Finance Director at Upflow","slug":"alex-finance-director"}},"acf":{"seo_title":"Days Sales Outstanding (DSO): Meaning & Interpretation","seo_description":"Learn about the meaning of Days Sales Outstanding (DSO). Find out how to calculate, interpret, and enhance your DSO for better financial management.","body":[{"acf_fc_layout":"paragraph","content":"

DSO’s meaning lies in it’s full form: Days Sales Outstanding. It is a financial metric used to measure the average number of days it takes for a company to collect payment after a sale has been made. DSO is an indicator of the efficiency of a company’s accounts receivable management and overall cash flow health. Days Sales Outstanding can be calculated by dividing total accounts receivable by the gross revenue over the period, then multiplying by the number of days in that period. In this blog we will talk about:

\n"},{"acf_fc_layout":"bullet_list","items":[{"text":"The Meaning of DSO"},{"text":"How to Calculate Your DSO"},{"text":"Factors Affecting DSO"},{"text":"How to Interpret Your DSO?"},{"text":"Days Sales Outstanding (DSO) by Industry"},{"text":"

How to Reduce Your DSO?

"}]},{"acf_fc_layout":"paragraph","content":"

Check out our free spreadsheet template to calculate, improve and interpret your DSO!

\n"},{"acf_fc_layout":"hubspot_cta","id":"3f44d79a-b614-418a-811b-1384592bac47","alt":"download the free spreadsheet"},{"acf_fc_layout":"space_block"},{"acf_fc_layout":"heading","text":"DSO Meaning","level":"h2"},{"acf_fc_layout":"paragraph","content":"

Days Sales Outstanding (DSO) quantifies the average time it takes for a company to convert credit sales into cash. Also known as days sales in accounts receivable or debtor days, it is a vital metric for assessing a business’s cash flow efficiency and the effectiveness of its credit and collections processes.

\n"},{"acf_fc_layout":"paragraph","content":"

For example, a company with a DSO of 30 days collects payments, on average, within a month after invoicing customers.

\n"},{"acf_fc_layout":"paragraph","content":"

The true significance of DSO lies in its context. Whether viewed through the lens of accounting, finance, or general business strategy, this metric offers unique insights into cash flow performance and decision-making. Let’s explore these perspectives further:

\n"},{"acf_fc_layout":"heading","text":"DSO Meaning in Accounting","level":"h3"},{"acf_fc_layout":"paragraph","content":"

In accounting, DSO measures how long it takes to collect cash from credit sales, highlighting the efficiency of accounts receivable management. A low DSO reflects prompt payments, while a high DSO may indicate issues with credit policies or customer payment habits.

\n"},{"acf_fc_layout":"paragraph","content":"

Accountants use DSO to monitor cash inflows, ensure liquidity, and align payment terms with industry standards. Regular calculation helps reduce bad debt risks and improve cash flow management.

\n"},{"acf_fc_layout":"heading","text":"DSO Meaning in Finance","level":"h3"},{"acf_fc_layout":"paragraph","content":"

In finance, DSO evaluates a company’s ability to convert credit sales into cash, directly impacting liquidity and working capital.

\n"},{"acf_fc_layout":"paragraph","content":"

A high DSO ties up cash in unpaid invoices, increasing financial risk, while a low DSO ensures better cash flow. Financial analysts use it to benchmark performance, assess credit policies, and identify areas for improvement.

\n"},{"acf_fc_layout":"heading","text":"DSO Meaning in Business","level":"h3"},{"acf_fc_layout":"paragraph","content":"

For businesses, DSO reflects customer payment behavior, operational efficiency, and overall financial strategy. A lower DSO suggests efficient collection processes and strong customer relationships, while a higher DSO may signal inefficiencies or payment issues.

\n"},{"acf_fc_layout":"paragraph","content":"

Business leaders rely on DSO to balance sales growth with financial stability, identify cash flow trends, and ensure sufficient reserves for growth, supplier payments, and other needs.

\n"},{"acf_fc_layout":"paragraph","content":"

Now that we understand what DSO represents, the next step is learning how to calculate it accurately.

\n"},{"acf_fc_layout":"space_block"},{"acf_fc_layout":"heading","text":"How to Calculate Your DSO","level":"h2"},{"acf_fc_layout":"heading","text":"Simple DSO Formula","level":"h3"},{"acf_fc_layout":"paragraph","content":"

The simple DSO method is quick to use. Divide your Accounts Receivable at the end of the period by your gross sales over the same period, then multiply by the number of days in that period.

\n"},{"acf_fc_layout":"image","image":"https://cms.upflow.dev.3codes.io/wp-content/uploads/2026/04/DSO-formula.png","caption":""},{"acf_fc_layout":"paragraph","content":"

This gives you an average, but it does not account for seasonality. If your activity drops in certain months or you are closed for part of the year, the result will not fully reflect your real payment delays.

\n"},{"acf_fc_layout":"heading","text":"The Countback Method","level":"h3"},{"acf_fc_layout":"paragraph","content":"

The countback method gives a more accurate DSO by tracking how long it actually took you to get paid.

\n"},{"acf_fc_layout":"paragraph","content":"

For this method, you need both your receivable balance and your gross sales amount over a given time frame, usually a month, from your balance sheet. Once you have these two numbers for each month, you compare them to each other going back in time.

\n"},{"acf_fc_layout":"paragraph","content":"

If your AR amount is higher than your sales amount for the month, you add the number of days in the month to your DSO calculation (you start at 0). When moving back a month, you subtract your gross sales from your A/R.

\n"},{"acf_fc_layout":"paragraph","content":"

If your gross sales are higher than your A/R amount, you calculate a day sales outstanding ratio. You divide your sales by your accounts receivable and then multiply this by the number of days in your month.

\n"},{"acf_fc_layout":"paragraph","content":"

You count back every month until you find your gross sales are higher than your A/R. Once you have added this month’s ratio to your DSO, you are done. Your DSO is the amount of time you have added together by counting back.

Here’s an example to make the countback method formula more concrete:

Depending on your industry, that might be a low DSO or a higher DSO than average. With time, you’ll get to know what your overall average DSO is and be able to spot any variation.

\n"},{"acf_fc_layout":"paragraph","content":"

Once you know how to compute your DSO, it becomes easier to understand what drives it up or down.

\n"},{"acf_fc_layout":"space_block"},{"acf_fc_layout":"heading","text":"Factors Affecting DSO","level":"h2"},{"acf_fc_layout":"paragraph","content":"

Understanding the key factors that influence Days Sales Outstanding (DSO) is crucial for optimizing cash flow and improving financial performance. Here are five critical factors that directly impact DSO:

\n"},{"acf_fc_layout":"heading","text":"1. Credit Terms","level":"h4"},{"acf_fc_layout":"paragraph","content":"

The credit terms a business offers to its customers can significantly affect DSO. Shorter payment periods, such as Net 30 or Net 45, generally lead to quicker payments and a lower DSO. On the other hand, longer credit terms (e.g., Net 60 or Net 90) might increase DSO, but could also help in fostering stronger customer relationships or gaining a competitive edge.

\n"},{"acf_fc_layout":"heading","text":"2. Customer Payment Behavior","level":"h4"},{"acf_fc_layout":"paragraph","content":"

Customer payment patterns are one of the most significant factors influencing DSO. If customers regularly delay payments, this naturally leads to a higher DSO. Understanding your customers’ payment habits and addressing late payment issues promptly can help maintain a more favorable DSO. Professionally drafted collection emails play a huge role in driving positive customer payment behaviour. Click on the banner below to download our free collection email templates

\n"},{"acf_fc_layout":"hubspot_cta","id":"12a2144f-0ec6-4566-8a8a-14d7a96b9823","alt":"cta email templates"},{"acf_fc_layout":"space_block"},{"acf_fc_layout":"heading","text":"3. Industry Standards","level":"h4"},{"acf_fc_layout":"paragraph","content":"

Different industries have varying norms when it comes to payment terms, which directly affects DSO. For example, our state of B2B payments report suggests industries like facilities management and consulting have longer payment cycles due to the nature of their projects. It’s important to compare your DSO to industry benchmarks to assess whether your business is performing within the standard range.

\n"},{"acf_fc_layout":"heading","text":"4. Invoice Accuracy and Timeliness","level":"h4"},{"acf_fc_layout":"paragraph","content":"

Inaccurate or delayed invoices can contribute to a longer DSO. Small errors, such as incorrect amounts or missing information, can cause delays in payment processing. Ensuring that invoices are clear, accurate, and sent promptly can reduce disputes and speed up collections, helping keep DSO in check.

\n"},{"acf_fc_layout":"heading","text":"5. Internal Collection Processes","level":"h4"},{"acf_fc_layout":"paragraph","content":"

An efficient and proactive collections process is key to reducing DSO. This includes having clear payment terms, regularly following up with customers, and addressing overdue payments promptly. Automating reminders and leveraging AR software tools, like Upflow, can streamline collections and improve cash flow management.

\n"},{"acf_fc_layout":"paragraph","content":"

With these factors in mind, you can start analyzing what your DSO says about your organization’s financial health.

\n"},{"acf_fc_layout":"space_block"},{"acf_fc_layout":"heading","text":"How to Interpret Your DSO?","level":"h2"},{"acf_fc_layout":"paragraph","content":"

A high Days Sales Outstanding (DSO) indicates that a company is selling its products or services on credit but takes a long time to collect payments from customers. This delay can lead to cash flow challenges, as the company may struggle to access the funds needed for ongoing operations. Conversely, a low DSO reflects the company’s ability to collect its accounts receivable quickly, ensuring a steady cash flow to support business growth. While the core definition of DSO remains consistent across industries, what constitutes a “good” DSO varies depending on industry norms and practices, as we’ll explore in the next section.

\n"},{"acf_fc_layout":"paragraph","content":"

While DSO is a valuable metric, it’s most effective when used as part of a broader analysis. Monitoring DSO trends over time can reveal patterns in customer payment behavior and help identify potential cash flow issues before they become critical. By comparing your DSO against industry benchmarks, you can assess whether your credit and collections processes are competitive or need improvement. In essence, DSO is more than just a number, it’s a vital indicator of your company’s financial agility and ability to meet its short-term obligations.

\n"},{"acf_fc_layout":"paragraph","content":"

Interested in calculating other important AR metrics? Click on the banner below and download our free spreadsheet

Now that you have this number at hand, you might be wondering what’s a good days sales outstanding. As is the case with all metrics, the answer is: it depends!

\n"},{"acf_fc_layout":"paragraph","content":"

The meaning of DSO remains the same but what’s a good DSO changes with different industries. Now let’s take a look at the DSO’s of various industries

\n"},{"acf_fc_layout":"space_block"},{"acf_fc_layout":"heading","text":"Days Sales Outstanding (DSO) by Industry","level":"h2"},{"acf_fc_layout":"paragraph","content":"

Better than the average – which we all know isn’t that insightful – you’ll find below the median DSO for different industries. This Days Sales Outstanding benchmark will allow you to see where you stand in comparison with your competitors.

\n"},{"acf_fc_layout":"image","image":"https://cms.upflow.dev.3codes.io/wp-content/uploads/2025/12/DSO-by-Industry-1.png","caption":""},{"acf_fc_layout":"paragraph","content":"

In our State of B2B Payments in 2024 report, the overall median DSO across industries is 56 days, but a closer look reveals significant variation, with some industries getting paid faster than others.

\n"},{"acf_fc_layout":"paragraph","content":"

In traditional sectors such as Office & Facilities Management and Consulting, DSOs are notably higher, with businesses often operating on 90-day payment terms. However, even companies at the median in Office & Facilities Management struggle to enforce these terms. On the other hand, organizations in the top 25th percentile in this sector (those we refer to as ‘the best in Upflow) manage to achieve a DSO of 78 days, ensuring payments are received well within their terms.

\n"},{"acf_fc_layout":"paragraph","content":"

Clothing, Accessories & Home businesses experience the lowest median DSO across all industries on Upflow. This may be because, as mentioned earlier, their need to maintain physical inventory encourages them to prioritize prompt payment after a transaction. Additionally, these businesses can more easily enforce payment through credit exposure, customers simply won’t receive their next batch of products until payment is made. This contrasts with industries like Office & Facilities Management, where evicting people from their offices isn’t a feasible option if they fail to pay.

\n"},{"acf_fc_layout":"paragraph","content":"

Let’s take a moment to remind you that you need to calculate your company’s DSO in order to see where you rank. Regardless of the method, you’re using here, it will help you get an idea of where you stand.

\n"},{"acf_fc_layout":"paragraph","content":"

Now that you know where your company stands with your Days Sales Outstanding, you can focus on improving this number.

\n"},{"acf_fc_layout":"hubspot_cta","id":"5dce7b06-14d0-4a82-a83c-2c25ba953ea2","alt":"Discover CTA"},{"acf_fc_layout":"space_block"},{"acf_fc_layout":"heading","text":"How to Reduce Your DSO?","level":"h2"},{"acf_fc_layout":"paragraph","content":"

If you have a higher DSO – that is, higher than your industry average – then you’ll want to reduce and improve it.

\n"},{"acf_fc_layout":"paragraph","content":"

A lower DSO means a shorter cash conversion cycle, more opportunities to invest, and overall better working capital management.

\n"},{"acf_fc_layout":"paragraph","content":"

A low DSO and efficient Cash collection can quickly improve your runway: as an example, going from an 80% to 140% collection rate can double your cash runway in a few months. Check out our free spreadsheet that calculates your runway, as well as the impact cash collection, can have on it. Here are some ways to reduce and improve your DSO:

\n"},{"acf_fc_layout":"heading","text":"1. Automate your billing process","level":"h3"},{"acf_fc_layout":"paragraph","content":"

Sending and tracking your invoices automatically reduces human errors – which we tend to underestimate and reduces cash flow problems. By scheduling automatic reminders, you’ll be able to keep the process under control. This can look like a reminder to your team to send a personalized email to your client or to pick up the phone.

\n"},{"acf_fc_layout":"image","image":"https://cms.upflow.dev.3codes.io/wp-content/uploads/2026/07/quote-wttj-7.svg","caption":""},{"acf_fc_layout":"paragraph","content":"

Check out how automated reminders helped Welcome to the Jungle reduce it’s DSO by 18%. Read the full customer story here.

\n"},{"acf_fc_layout":"heading","text":"2. Maintain positive relationships with customers","level":"h3"},{"acf_fc_layout":"paragraph","content":"

In general, keeping regular contact with your customers is a good idea. It’s essential that managing your days sales outstanding ratio doesn’t negatively impact your relationship with your customers.

\n"},{"acf_fc_layout":"paragraph","content":"

You should consider having a discretionary payment date relative to your relationship with them i.e. more flexibility with long-term customers and bigger accounts. Focusing on rewarding rather than penalizing customers is a good approach. A closer relationship means more loyalty, repeat business, and better feedback on your product or services.

\n"},{"acf_fc_layout":"paragraph","content":"

That’s typically the role of Account Executives or Customer Service Managers, whose role isn’t only to close the sale – it’s also to help the company collect the money!

\n"},{"acf_fc_layout":"heading","text":"3. Offer customers incentives for early payment","level":"h3"},{"acf_fc_layout":"paragraph","content":"

An efficient way to reduce your DSO is to offer perks in your payment terms for your clients to do so. It could look like a % discount on said invoice if they pay early, or a discount on their next purchase with you. It could also be a kind of bonus that’s relevant to your business or even a gift!

\n"},{"acf_fc_layout":"paragraph","content":"

One strategy for improving cash flow is offering early-payment discounts, but an even more effective approach is offering discounts to customers who agree to make a yearly payment upfront rather than monthly payments. This not only incentivizes customers but also secures more cash for the business and reduces the number of invoices that need to be processed or chased on a monthly basis.

\n"},{"acf_fc_layout":"heading","text":"4. Improve invoice accuracy and clarity","level":"h3"},{"acf_fc_layout":"paragraph","content":"

Small errors can delay payment by days or even weeks. Make sure every invoice includes the correct amount, PO number, due date, billing address, and contact info. Clear and accurate invoices reduce disputes and speed up collections.

\n"},{"acf_fc_layout":"heading","text":"5. Tighten your credit policy","level":"h3"},{"acf_fc_layout":"paragraph","content":"

Having clear criteria for extending credit can help prevent late payments. This includes assessing customer risk, setting appropriate credit limits, and reviewing terms regularly. A stronger credit policy reduces the number of invoices that end up overdue in the first place.

\n"},{"acf_fc_layout":"heading","text":"6. Make payment easier for customers","level":"h3"},{"acf_fc_layout":"paragraph","content":"

The fewer obstacles customers face, the faster they pay. Offer multiple payment methods (ACH, SEPA, credit card), provide a branded payment portal, and make it simple to pay from reminders. This convenience alone can significantly reduce DSO.

\n"},{"acf_fc_layout":"paragraph","content":"

Bringing these practices together creates a more predictable, efficient collections process and a healthier DSO over time. And with the right tools, putting these strategies into action becomes much easier.

\n"},{"acf_fc_layout":"hubspot_cta","id":"eed4ccd6-5fb9-494d-8bba-c73d99199d77","alt":"Discover"},{"acf_fc_layout":"space_block"},{"acf_fc_layout":"heading","text":"FAQs","level":"h2"},{"acf_fc_layout":"article_faq","items":[{"question":"What does DSO or Days Sales Outstanding tell me about my business?","answer":"

DSO measures how long it takes your company to collect cash after a sale is made on credit. It reveals the efficiency of your collections process, your customers’ payment behavior, and the strength of your cash flow. A high DSO can signal potential liquidity issues, while a low DSO reflects faster cash conversion and healthier finances.

\n"},{"question":"What is a “good” DSO?","answer":"

A “good” DSO varies by industry and business model. According to Upflow’s State of B2B Payments in 2024 report, the overall median DSO across industries is 56 days. However, some sectors, like Consulting or Facilities Management, often operate with longer payment terms (up to 90 days), while industries like Retail and Consumer Goods typically see much shorter cycles. The best way to evaluate your DSO is to benchmark it against your specific industry and monitor it over time.

\n"},{"question":"What factors have the biggest impact on my DSO?","answer":"

The main factors include your credit terms, customer payment behavior, invoice accuracy, internal collection processes, and the industry standards you operate in. For example, longer credit terms or late-paying clients naturally extend your DSO, while accurate invoicing and proactive follow-ups help reduce it.

\n"},{"question":"What’s the difference between DSO and Average Collection Period?","answer":"

These two terms are often used interchangeably, but there are subtle differences in context:

– DSO (Days Sales Outstanding) measures how many days on average it takes to collect payment after a sale on credit.

– Average Collection Period refers more broadly to the average number of days it takes to collect receivables, regardless of the period in which the sale occurred.

While the formulas can be quite similar, DSO is more frequently used in ongoing operational and financial reporting, especially in B2B businesses.

\n"},{"question":"What’s the difference between DSO and Accounts Receivable Turnover?","answer":"

DSO and accounts receivable turnover ratio are both metrics used to assess how efficiently a company collects its receivables, but they take different approaches:

– DSO is a time-based measure, telling you the average number of days taken to collect the payment.

– AR turnover ratio is an activity-based measure, showing how many times, on average, receivables are collected in a year.

They are mathematically related. A high AR turnover ratio generally means a low DSO, and vice versa. But DSO is usually easier to interpret in terms of payment timelines and cash flow impact.

\n"},{"question":"How often should I monitor DSO?","answer":"

You should monitor DSO at least monthly, especially if cash flow, customer payment behavior, or sales volumes fluctuate often. Tracking DSO over time helps you:

– Spot trends or warning signs early
\n– Compare periods (e.g., seasonal cycles)
\n– Benchmark against industry averages
\n– Measure the impact of policy or process changes
\n– Frequent tracking also allows for faster course correction if DSO starts to rise unexpectedly.

\n"},{"question":"Why is my DSO increasing even though sales are steady?","answer":"

If your sales volume remains steady but your DSO is rising, it usually signals a delay in collections. Here are possible causes:

– Customers are paying later than usual
\n– There are more payment disputes or invoice errors
\n– Internal collections processes have slowed down
\n– Your business has extended credit terms (even informally)

It may also be that a few large outstanding invoices are skewing your DSO, even if smaller accounts are paying on time. A deeper look at customer-level aging reports or invoice cycles using AR automation tools like Upflow can help pinpoint the issue.

\n"},{"question":"Can DSO be negative? What would that mean?","answer":"

Technically, DSO cannot be negative, since it measures the number of days it takes to collect revenue after a sale. A negative value would imply you’re collecting payment before making the sale, which isn’t how receivables work.

However, if you’re using upfront billing or prepayments (e.g., in SaaS or subscriptions), you might interpret it as a very low DSO, but it still wouldn’t be shown as a negative number. Instead, you’d track deferred revenue or use different metrics to measure prepayment behavior.

\n"}]}],"primary_category":{"term_id":393,"name":"Reduce DSO","slug":"reduce-dso","term_group":0,"term_taxonomy_id":116,"taxonomy":"category","description":"DSO is a crucial metric to track: it indicates how long it takes you to get paid by your clients. The closer it is to your payment terms, the better. Here you'll find articles and resources to help you reduce your DSO and get your business on the right track.","parent":0,"count":9,"filter":"raw"},"right_sidebar_call_to_action_id":"1bc55892-19e2-4952-833e-4c0aa95ea224","right_sidebar_call_to_action_alt":"DSO Spreadsheet","related_author_id":10617,"date_modified":"29/07/2026","og_image":false,"og_title":"","og_description":"","canonical_mode":"auto","x_default_mode":"auto","noindex":false,"nofollow":false,"_taxonomies":{"category":[{"id":374,"name":"AR metrics","slug":"ar-metrics","description":"Tracking your receivable KPIs is crucial to mesure the efficiency of your cash collection. But which metric should you track? And how can you calculate and improve them? Have a look at our dedicated articles.","parent":null},{"id":393,"name":"Reduce DSO","slug":"reduce-dso","description":"DSO is a crucial metric to track: it indicates how long it takes you to get paid by your clients. The closer it is to your payment terms, the better. Here you'll find articles and resources to help you reduce your DSO and get your business on the right track.","parent":null}],"translation_priority":[{"id":11,"name":"Optional","slug":"optional","description":"","parent":null}]}},"publishedAt":"December 30, 2025","publishedAtIso":"2025-12-30T01:00:00Z","modifiedAtIso":"$undefined"},{"title":"DSO Formula: How to Calculate, Benchmark & Improve","description":"Learn the 2 DSO calculation formulas (simple and countback) when to use each how to benchmark your DSO with industry medians, and practical steps to reduce DSO.","image":"https://cms.upflow.dev.3codes.io/wp-content/uploads/2025/12/dso-calculation-formula.png","imageAlt":"","fields":{"link":"/blog/reduce-dso/dso-calculation-formula","_taxonomies":{"article_type":[{"id":374,"name":"AR metrics","slug":"ar-metrics","description":""}]},"author":{"name":"Alexandre Antoine","image":"https://cms.upflow.dev.3codes.io/wp-content/uploads/2026/07/9-1.png","description":"

\n","position":"Finance Director at Upflow","slug":"alex-finance-director"}},"acf":{"seo_title":"The 2 DSO Formulas: How to Calculate, Benchmark & Improve","seo_description":"Learn the 2 DSO calculation formulas (simple and countback) when to use each how to benchmark your DSO with industry medians, and practical steps to reduce DSO.","body":[{"acf_fc_layout":"paragraph","content":"$5a"},{"acf_fc_layout":"hubspot_cta","id":"3f44d79a-b614-418a-811b-1384592bac47","alt":"calculate DSO"},{"acf_fc_layout":"paragraph","content":"

The Simple Formula to Calculate DSO

Simple DSO Formula (With Step-by-Step Example)

The simple DSO method is named this way for a reason: it is a very quick and straightforward way to calculate Days Sales Outstanding.

To calculate it, you need to divide your Accounts Receivable at the end of the period by your gross sales over the same period. You then multiply this number by the number of days in the period.

\n"},{"acf_fc_layout":"copy_paste_block","content":"

Simple DSO formula: DSO = (Accounts Receivable ÷ Total Credit Sales) × Number of Days

\n"},{"acf_fc_layout":"paragraph","content":"

Here’s how that looks laid out:

\n"},{"acf_fc_layout":"image","image":"https://cms.upflow.dev.3codes.io/wp-content/uploads/2026/04/DSO-formula.png","caption":""},{"acf_fc_layout":"color_block","content":"

Let’s take a quick example:

Your sales at the end of the year are $2,000,000.
Your Accounts Receivables are $200,000.

Using the simple method, your DSO would be $200,000 / $2,000,000 * 365 = 36.5 days

That means that over the year, it took your business 36,5 days on average to get paid.

\n"},{"acf_fc_layout":"paragraph","content":"$5b"},{"acf_fc_layout":"table_block","paste_table":"","caption":"","is_first_column_header":false,"header_cells":[{"content":"Period","align":"center","colspan":"1"},{"content":"A/R","align":"center","colspan":"1"},{"content":"Gross Sales","align":"center","colspan":"1"},{"content":"DSO","align":"center","colspan":"1"}],"rows":[{"cells":[{"content":"May (31 days)","align":"center","colspan":"1"},{"content":"$$11,000","align":"center","colspan":"1"},{"content":"$$3,000","align":"center","colspan":"1"},{"content":"31 days","align":"center","colspan":"1"}]},{"cells":[{"content":"June (30 days)","align":"center","colspan":"1"},{"content":"$$8,000","align":"center","colspan":"1"},{"content":"$$1,000","align":"center","colspan":"1"},{"content":"30 + 31 = 61 days","align":"center","colspan":"1"}]},{"cells":[{"content":"July (31 days)","align":"center","colspan":"1"},{"content":"$$7,000","align":"center","colspan":"1"},{"content":"$$10,000","align":"center","colspan":"1"},{"content":"61 + 21 = 82 days","align":"center","colspan":"1"}]}],"style":false},{"acf_fc_layout":"paragraph","content":"$5c"},{"acf_fc_layout":"paragraph","content":"$5d"},{"acf_fc_layout":"image","image":"https://cms.upflow.dev.3codes.io/wp-content/uploads/2025/12/DSO-by-Industry-1.png","caption":""},{"acf_fc_layout":"paragraph","content":"$5e"},{"acf_fc_layout":"hubspot_cta","id":"eed4ccd6-5fb9-494d-8bba-c73d99199d77","alt":"Discover"},{"acf_fc_layout":"article_faq","items":[{"question":"What is the days receivable outstanding formula?","answer":"

Days receivable outstanding (also called days sales outstanding or DSO) uses the same formula: (Accounts Receivable ÷ Total Credit Sales) × Number of Days. It measures how long it takes to collect payment on credit sales. The terms “days receivable outstanding,” “AR days outstanding,” and “days sales outstanding” all refer to the same metric and use the same calculation.

\n"},{"question":"How do you calculate average days sales outstanding?","answer":"

Average days sales outstanding is calculated the same way as DSO: (Accounts Receivable ÷ Total Credit Sales) × Number of Days. The “average” simply refers to the fact that DSO is by nature an average across all your invoices in the period. To track trends, calculate your DSO monthly and compare across periods. If DSO is rising over time, it signals collections are slowing down.

\n"},{"question":"What are the 2 formulas to calculate DSO?","answer":"

There are two common ways to calculate DSO: the simple method and the countback method: – Simple method: Gives a quick average collection time across a chosen period. – Countback method: Typically more accurate, because it “counts back” using month-by-month (or period-by-period) sales against A/R, which better reflects uneven collections and seasonality.

\n"},{"question":"How do I calculate DSO if sales are seasonal or uneven?","answer":"

If your sales fluctuate throughout the year, the simple DSO Formula may give a misleading average, as it doesn’t reflect monthly variations. Instead, use the countback method as it calculates DSO by analyzing your accounts receivable and gross sales month by month, adjusting for seasonal highs and lows. This makes it far more accurate for businesses with non-linear or seasonal sales patterns, helping you understand your actual cash collection timeline.

\n"},{"question":"Why is Excel not ideal for calculating DSO?","answer":"

Excel works fine for quick math, but it gets error-prone and time-consuming, especially for the countback method, which requires maintaining period-by-period A/R and sales and updating formulas constantly. Using an AR tool to automate DSO calculation reduces manual effort, improves accuracy, and helps you spend more time actually lowering DSO.

\n"},{"question":"What is a “good” DSO, and how do I interpret my result?","answer":"

A “good” DSO depends on your industry norms, payment terms, and customer mix, Thus, the most useful next step after calculating DSO is to benchmark it against companies in your sector. If your DSO is significantly higher than your industry median (or your own historical baseline), it usually signals issues like slow invoicing, payment friction, or inconsistent follow-ups.

\n"},{"question":"What is a good DSO by industry?","answer":"

A good DSO depends heavily on your sector. Based on Upflow’s B2B payments data, the overall median across industries is 56 days. Industries with short payment cycles (such as retail or clothing and accessories) tend to have DSOs well below 45 days. Industries with longer contract cycles, such as consulting or facilities management, commonly see DSOs of 60 to 90 days or higher. As a general rule, a DSO below your industry median means you are collecting faster than your peers.

\n"},{"question":"What are the best ways to reduce DSO after I calculate it?","answer":"

Once you know your DSO and how it compares to benchmarks, focus on actions that shorten time-to-cash without harming relationships:

1. Set tighter terms and expectations early (contracts, POs, invoice approvals).

2. Invoice faster and more accurately (right references, standardized templates).

3. Make payment easy (payment links, multiple methods, less back-and-forth).

4. Automate reminders and prioritize high-impact accounts (clear escalation paths).

5. Improve credit and collections strategy (limits, risk-based terms, monitor aging/disputes).

\n"}]}],"primary_category":{"term_id":393,"name":"Reduce DSO","slug":"reduce-dso","term_group":0,"term_taxonomy_id":116,"taxonomy":"category","description":"DSO is a crucial metric to track: it indicates how long it takes you to get paid by your clients. The closer it is to your payment terms, the better. Here you'll find articles and resources to help you reduce your DSO and get your business on the right track.","parent":0,"count":9,"filter":"raw"},"right_sidebar_call_to_action_id":"1bc55892-19e2-4952-833e-4c0aa95ea224","right_sidebar_call_to_action_alt":"DSO Spreadsheet","related_author_id":10617,"date_modified":"29/07/2026","og_image":false,"og_title":"","og_description":"","canonical_mode":"auto","x_default_mode":"auto","noindex":false,"nofollow":false,"_taxonomies":{"category":[{"id":374,"name":"AR metrics","slug":"ar-metrics","description":"Tracking your receivable KPIs is crucial to mesure the efficiency of your cash collection. But which metric should you track? And how can you calculate and improve them? Have a look at our dedicated articles.","parent":null},{"id":393,"name":"Reduce DSO","slug":"reduce-dso","description":"DSO is a crucial metric to track: it indicates how long it takes you to get paid by your clients. The closer it is to your payment terms, the better. Here you'll find articles and resources to help you reduce your DSO and get your business on the right track.","parent":null}],"translation_priority":[{"id":11,"name":"Optional","slug":"optional","description":"","parent":null}]}},"publishedAt":"December 8, 2025","publishedAtIso":"2025-12-08T01:00:00Z","modifiedAtIso":"$undefined"},{"title":"Financial Dashboards for Modern Finance Teams","description":"Learn how financial dashboards help modern finance teams gain visibility, improve efficiency, and make smarter, data-driven decisions.","image":"https://cms.upflow.dev.3codes.io/wp-content/uploads/2025/10/financial-dashboard.png","imageAlt":"","fields":{"link":"/blog/ar-metrics/financial-dashboard","_taxonomies":{"article_type":[{"id":374,"name":"AR metrics","slug":"ar-metrics","description":""}]},"author":{"name":"Jean-Malo Le Dreff","image":"https://cms.upflow.dev.3codes.io/wp-content/uploads/2026/07/10.png","description":"

About the Author

Jean-Malo (JM) is the Director of Product Management at Upflow, where he leads the design and development of the platform’s core features. With a strong product mindset and a deep understanding of user needs, JM ensures Upflow’s tools deliver both functionality and delight to modern finance teams.

At Upflow, he works cross-functionally to translate customer feedback into intuitive, impactful features, especially around integrations, workflows, and platform scalability. His expertise lies in making complex financial processes simpler through thoughtful product design and seamless system connectivity.

JM contributes to Upflow’s blog with practical, product-driven content that helps users get the most value from the platform. He writes in-depth guides on product comparisons, software integrations, and the strategic advantages of using Upflow within a broader finance tech stack.

\n","position":"Director of Product Management at Upflow","slug":"jean-malo-le-dreff"}},"acf":{"seo_title":"Financial Dashboards for Modern Finance Teams","seo_description":"Learn how financial dashboards help modern finance teams gain visibility, improve efficiency, and make smarter, data-driven decisions.","body":[{"acf_fc_layout":"paragraph","content":"

Finance teams don’t stay static. They grow, adapt, and become more sophisticated as their companies scale. What starts as a small team focused on keeping the books clean eventually transforms into a strategic function that drives decision at the executive level.

\n"},{"acf_fc_layout":"paragraph","content":"

Your financial dashboard should reflect that evolution.

\n"},{"acf_fc_layout":"paragraph","content":"

Most finance leaders start with the basics: tracking outstanding invoices, monitoring cash flow, and making sure nothing falls through the cracks. But as the team matures, the questions change. How efficiently are we collecting? Where are the bottlenecks? What will our cash position look like in 60 days? Can we spot problems before they become crises?

\n"},{"acf_fc_layout":"paragraph","content":"

The challenge is real. A staggering 86% of businesses report that up to 30% of their monthly invoiced sales become overdue, highlighting the urgent need for better systems and visibility. Meanwhile, 44% of CFOs struggle with data visibility, even as their role demands increasingly strategic, data-driven decision-making.

\n"},{"acf_fc_layout":"paragraph","content":"

The best financial dashboards aren’t one-size-fits-all. They adapt to where your team is today and where you’re headed tomorrow. Understanding this progression helps you build dashboards that actually serve your needs, not just display data.

\n"},{"acf_fc_layout":"paragraph","content":"

Keep reading to learn more about the three stages of dashboard maturity:

\n"},{"acf_fc_layout":"bullet_list","items":[{"text":"Stage 1: Foundational Dashboard (Visibility & Control)"},{"text":"Stage 2: Performance Dashboard (Efficiency & Benchmarking)"},{"text":"Stage 3: Strategic Dashboard (Forecasting & Decision Making)"}]},{"acf_fc_layout":"paragraph","content":"

Each stage builds on the last, adding layers of insight that help finance teams move from reactive to proactive to truly strategic. See how your finance team can unlock visibility and control with Upflow’s free Discover plan.

\n"},{"acf_fc_layout":"hubspot_cta","id":"5dce7b06-14d0-4a82-a83c-2c25ba953ea2","alt":"discover"},{"acf_fc_layout":"space_block"},{"acf_fc_layout":"heading","text":"Stage 1: Foundational Dashboard (Visibility & Control)","level":"h2"},{"acf_fc_layout":"paragraph","content":"

Every mature finance operation starts with the same question: What’s actually happening?

\n"},{"acf_fc_layout":"paragraph","content":"

At this stage, the priority is visibility. Finance teams need a clear, accurate picture of accounts receivable, payment activity, and cash collection. Without this foundation, everything else falls apart. You can’t optimize what you can’t see, and you certainly can’t forecast without reliable baseline data.

\n"},{"acf_fc_layout":"heading","text":"What this dashboard does:","level":"h3"},{"acf_fc_layout":"paragraph","content":"

The foundational dashboard gives your team a single source of truth for AR and collections. It answers essential questions: How much is outstanding? What came in this week? Which invoices are aging? What actions have we taken?

\n"},{"acf_fc_layout":"paragraph","content":"

This is where most teams start, and it’s exactly where they should. Building this layer right means establishing data integrity, consistent reporting cadences, and clear ownership over key metrics.

\n"},{"acf_fc_layout":"heading","text":"Core widgets for foundational visibility:","level":"h3"},{"acf_fc_layout":"bullet_list","items":[{"text":"A/R Financials Summary: The big-picture snapshot of your receivables health."},{"text":"DSO (Days Sales Outstanding): The foundational efficiency metric that tells you how long it takes to collect payment after a sale."},{"text":"Aging Balance: A detailed breakdown of receivables by aging buckets (0-30, 31-60, 61-90, 90+ days)."},{"text":"Outstanding Amount: A real-time view of what's owed to you, segmented by customer, aging balance, or risk level."},{"text":"Actions: A log of collection activities, whether automated reminders, manual follow-ups, or payment plan negotiations."}]},{"acf_fc_layout":"image","image":"https://cms.upflow.dev.3codes.io/wp-content/uploads/2022/06/aging-widget.png","caption":""},{"acf_fc_layout":"paragraph","content":"

Once the foundational layer is solid, finance teams naturally start asking the next level of questions: How well are we doing this? Where can we improve?

\n"},{"acf_fc_layout":"hubspot_cta","id":"5dce7b06-14d0-4a82-a83c-2c25ba953ea2","alt":"discover"},{"acf_fc_layout":"space_block"},{"acf_fc_layout":"heading","text":"Stage 2: Performance Dashboard (Efficiency & Benchmarking)","level":"h2"},{"acf_fc_layout":"paragraph","content":"

Visibility is the starting point. Efficiency is the goal.

\n"},{"acf_fc_layout":"paragraph","content":"

As finance teams mature, they shift from simply tracking what’s happening to measuring how well they’re performing. They want to know if collection efforts are effective, if processes are working, and how they stack up against industry benchmarks.

\n"},{"acf_fc_layout":"paragraph","content":"

This is where the dashboard becomes a performance management tool. It’s no longer just about reporting numbers but about driving continuous improvement. The data supports this evolution: a 2024 McKinsey study found that companies focusing on team performance are over four times more likely to outperform their peers, underscoring how performance insights can directly improve outcomes.

\n"},{"acf_fc_layout":"heading","text":"What this dashboard does:","level":"h3"},{"acf_fc_layout":"paragraph","content":"

The performance dashboard helps teams optimize their collection process. It surfaces engagement metrics, measures effectiveness, highlights bottlenecks, and provides context through benchmarking. Teams use it to spot underperforming processes, test new approaches, and celebrate wins.

\n"},{"acf_fc_layout":"paragraph","content":"

Finance leaders at this stage ask sharper questions: Are our reminder emails getting opened? Which billing cohorts convert best? Are we collecting as efficiently as our peers? Where is the team spending their time?

\n"},{"acf_fc_layout":"heading","text":"Core widgets for performance optimization:","level":"h3"},{"acf_fc_layout":"bullet_list","items":[{"text":"Collection Effectiveness Index (CEI): A more sophisticated metric than DSO that measures how much of your available receivables you actually collected in a period."},{"text":"Billing Cohorts: Track groups of invoices by when they were issued, and watch how they age over time."},{"text":"Action Emails Open Rate: Measure engagement with your automated payment reminders."},{"text":"Team Activity: Understand where your AR team's time goes."},{"text":"Benchmark: Compare your metrics against industry standards or peer companies."}]},{"acf_fc_layout":"image","image":"https://cms.upflow.dev.3codes.io/wp-content/uploads/2022/06/billing-cohorts-widget.png","caption":""},{"acf_fc_layout":"paragraph","content":"

As teams master efficiency, the natural next step is anticipation. The question evolves from “How well are we collecting?” to “What happens next?”

\n"},{"acf_fc_layout":"hubspot_cta","id":"5dce7b06-14d0-4a82-a83c-2c25ba953ea2","alt":"discover"},{"acf_fc_layout":"space_block"},{"acf_fc_layout":"heading","text":"Stage 3: Strategic Dashboard (Forecasting & Decision Making)","level":"h2"},{"acf_fc_layout":"paragraph","content":"

The most sophisticated finance teams don’t just report on the past or optimize the present. They use data to shape the future.

\n"},{"acf_fc_layout":"paragraph","content":"

Strategic dashboards are built for decision-making. They help CFOs and finance leaders forecast cash positions, model scenarios, identify emerging risks, and make proactive decisions that impact the entire business. This is where finance truly becomes a strategic partner to the executive team.

\n"},{"acf_fc_layout":"paragraph","content":"

The need for this capability is clear. Research from EY reveals that companies are nearly three times as likely to underperform their cash flow forecast targets (47%) as they are to miss their revenue guidance targets (16%), demonstrating just how challenging accurate forecasting can be without the right tools and data.

\n"},{"acf_fc_layout":"heading","text":"What this dashboard does:","level":"h3"},{"acf_fc_layout":"paragraph","content":"

The strategic dashboard turns historical data and current trends into forward-looking insights. It answers questions that executives care about: What will our cash position look like in 90 days? Are there red flags we need to address now? How do our collection trends compare to last quarter? What levers can we pull to improve liquidity?

\n"},{"acf_fc_layout":"paragraph","content":"

These dashboards are dense with information but focused on actionable intelligence. They’re designed for leaders who need to make informed decisions quickly, often under pressure.

\n"},{"acf_fc_layout":"heading","text":"Core widgets for strategic planning:","level":"h3"},{"acf_fc_layout":"bullet_list","items":[{"text":"Cash Forecast: The centerpiece of strategic finance that helps finance teams plan for capital needs, investment opportunities, and potential shortfalls."},{"text":"Payment Mix: A breakdown of how customers are paying you - by card, bank transfer, direct debit, cash, or check. This data helps CFOs optimize their payment strategy by understanding which methods customers prefer and which methods are most cost-effective."},{"text":"Convenience Fees: As customers increasingly expect frictionless payment experiences, understanding the economics of convenience fees helps finance leaders balance customer satisfaction with cost recovery."},{"text":"Billing Cohorts: % At-Risk: At the strategic level, this widget becomes a leading indicator. A sudden spike in at-risk invoices might signal broader customer health issues, product problems, or market shifts. Finance leaders use this data to alert sales, customer success, or the executive team."},{"text":"A/R Financials Summary (Strategic View): The same widget from Stage 1, but now viewed through a strategic lens. Leaders use it to spot macro trends and assess the overall health of the receivables portfolio."}]},{"acf_fc_layout":"image","image":"https://cms.upflow.dev.3codes.io/wp-content/uploads/2022/10/square.png","caption":""},{"acf_fc_layout":"paragraph","content":"

Strategic dashboards turn finance into a forward-looking function. They enable proactive decision-making, improve capital efficiency, and help companies navigate uncertainty with confidence.

\n"},{"acf_fc_layout":"paragraph","content":"

This is the maturity level that turns CFOs into true strategic partners. And it’s the level where dashboards stop being reporting tools and become decision engines.

\n"},{"acf_fc_layout":"hubspot_cta","id":"5dce7b06-14d0-4a82-a83c-2c25ba953ea2","alt":"discover"},{"acf_fc_layout":"space_block"},{"acf_fc_layout":"heading","text":"Your Dashboard Should Grow With You","level":"h2"},{"acf_fc_layout":"paragraph","content":"

The finance teams winning today aren’t the ones with the most data. They’re the ones with the right data, configured for their current needs and ready to evolve.

\n"},{"acf_fc_layout":"paragraph","content":"

Most companies don’t jump straight to strategic forecasting. They start with visibility, master the basics, then layer in performance metrics as their operations mature. The mistake is locking yourself into rigid systems that can’t adapt. Your dashboard today should support where you are now, but the platform behind it needs to scale with where you’re going.

\n"},{"acf_fc_layout":"paragraph","content":"

The best finance leaders think about their tech stack the same way they think about hiring: invest in flexibility and growth potential. A dashboard that works for a 10-person finance team won’t cut it at 50 people. But rebuilding from scratch every time you level up? That’s expensive, disruptive, and unnecessary.

\n"},{"acf_fc_layout":"blockquote","content":"Start where you are. Build for where you're headed.","name":"","title":"","profil_picture":false,"company_name":"","company_logo":false},{"acf_fc_layout":"paragraph","content":"

Upflow’s modular dashboard lets you begin with free analytics through our Discover plan, then add the widgets and capabilities you need as your team matures. Connect your accounting tool and see your data in minutes.

\n"},{"acf_fc_layout":"hubspot_cta","id":"eed4ccd6-5fb9-494d-8bba-c73d99199d77","alt":"Discover Upflow for free"},{"acf_fc_layout":"space_block"},{"acf_fc_layout":"heading","text":"FAQs","level":"h2"},{"acf_fc_layout":"article_faq","items":[{"question":"What's the difference between a foundational dashboard and a strategic dashboard?","answer":"

A foundational dashboard focuses on visibility and tracking what’s happening in your accounts receivable right now. It answers questions like “How much is outstanding?” and “What came in this week?” A strategic dashboard, on the other hand, uses historical data and trends to forecast future cash positions, identify emerging risks, and support executive decision-making. Most teams start with foundational dashboards and evolve to strategic ones as they mature.

\n"},{"question":"How do I know which dashboard stage my finance team is at?","answer":"

Ask yourself these questions: Are you still struggling to get a clear picture of your AR and collections? You’re likely at Stage 1 (Foundational). Can you see what’s happening but want to measure how efficiently you’re collecting? You’re ready for Stage 2 (Performance). Are you consistently hitting collection targets and now need to forecast cash and make strategic decisions? You’re ready for Stage 3 (Strategic).

\n"},{"question":"Can I use multiple dashboard stages at once?","answer":"

Absolutely! These stages aren’t mutually exclusive. Many mature finance teams maintain foundational widgets for daily operations while also using performance metrics to optimize processes and strategic widgets for forecasting. The key is ensuring you have a solid foundation before adding complexity. Don’t try to forecast cash if you can’t accurately track what’s currently outstanding.

\n"},{"question":"How often should finance teams review their dashboards?","answer":"

It depends on the dashboard type and your role. Foundational dashboards should be checked daily or weekly by AR teams to stay on top of collections. Performance dashboards are typically reviewed weekly or monthly to track trends and identify optimization opportunities. Strategic dashboards are often reviewed monthly or quarterly by CFOs and finance leaders for planning and forecasting purposes.

\n"},{"question":"Do I need expensive tools to build an effective financial dashboard?","answer":"

Not necessarily. Many modern AR and finance platforms offer free or low-cost dashboard options that connect directly to your accounting system. Upflow’s Discover plan, for example, provides free analytics and dashboards when you connect your accounting tool. The key is choosing a platform that can grow with you, so you don’t have to rebuild from scratch as your needs evolve.

\n"},{"question":" How long does it take to move from foundational to strategic dashboards?","answer":"

It varies by company, but most finance teams spend 3-6 months establishing solid foundational visibility before moving to performance optimization. The transition to strategic dashboards typically happens after 12-18 months once teams have reliable historical data and optimized collection processes. However, the timeline depends more on data quality and process maturity than calendar time. Focus on mastering each stage before advancing to the next.

\n"},{"question":"What's the biggest mistake finance teams make with dashboards?","answer":"

Trying to track everything at once. Teams often build dashboards packed with every possible metric, which creates noise rather than insight. The best approach is to start simple with the metrics that matter most for your current maturity stage, then add complexity as needed.

\n"}]}],"primary_category":{"term_id":374,"name":"AR metrics","slug":"ar-metrics","term_group":0,"term_taxonomy_id":97,"taxonomy":"category","description":"Tracking your receivable KPIs is crucial to mesure the efficiency of your cash collection. But which metric should you track? And how can you calculate and improve them? Have a look at our dedicated articles.","parent":0,"count":27,"filter":"raw"},"right_sidebar_call_to_action_id":"fa9d10f7-dd76-4797-9f51-15d35b9b6cfe","right_sidebar_call_to_action_alt":"Upflow's free discover plan","related_author_id":10637,"date_modified":"29/07/2026","og_image":false,"og_title":"","og_description":"","canonical_mode":"auto","x_default_mode":"auto","noindex":false,"nofollow":false,"_taxonomies":{"category":[{"id":374,"name":"AR metrics","slug":"ar-metrics","description":"Tracking your receivable KPIs is crucial to mesure the efficiency of your cash collection. But which metric should you track? And how can you calculate and improve them? Have a look at our dedicated articles.","parent":null}],"translation_priority":[{"id":11,"name":"Optional","slug":"optional","description":"","parent":null}]}},"publishedAt":"October 22, 2025","publishedAtIso":"2025-10-22T02:00:00Z","modifiedAtIso":"$undefined"},{"title":"Debtor Days: Formula, Interpretation & Tips to Reduce","description":"There are 2 debtor days formulas: The most accurate is the countback method, but it is more time-consuming than the simple one. Keep reading to find out more","image":"https://cms.upflow.dev.3codes.io/wp-content/uploads/2024/11/debtor-days.png","imageAlt":"","fields":{"link":"/blog/reduce-dso/debtor-days","_taxonomies":{"article_type":[{"id":374,"name":"AR metrics","slug":"ar-metrics","description":""}]},"author":{"name":"Aashima Lamba","image":"https://cms.upflow.dev.3codes.io/wp-content/uploads/2026/07/6.png","description":"$5f","position":"Marketing Director at Upflow","slug":"aashima-lamba"}},"acf":{"seo_title":"Debtor Days: Formula, Interpretation & Tips to Reduce","seo_description":"There are 2 debtor days formulas: The most accurate is the countback method, but it is more time-consuming than the simple one. Keep reading to find out more","body":[{"acf_fc_layout":"paragraph","content":"

Did you know as many as 58 per cent of small or medium enterprises (SMEs) across the UK are currently waiting on late payments from customers? Late payment is a significant problem for many businesses, hampering their cash flow, hiring plans, expansion and more. In fact, one in four bankruptcies in Europe occurs because of late payments.

\n"},{"acf_fc_layout":"paragraph","content":"

This exhaustive guide will delve deep into the “Debtor Days” metric. Keep reading to discover:

\n"},{"acf_fc_layout":"bullet_list","items":[{"text":"What is Debtor Days?"},{"text":"Debtor Days Formula"},{"text":"Debtor Days by Industry"},{"text":"How to Reduce your Debtor Days?"},{"text":"How can Upflow help?"}]},{"acf_fc_layout":"paragraph","content":"

Tired of late payments and prolonged debtor days? Click the banner below to connect with our cash collection experts and craft a personalized collection strategy for your business.

\n"},{"acf_fc_layout":"hubspot_cta","id":"8df0d460-70d0-40c2-bea0-b8236477d27a","alt":"demo req"},{"acf_fc_layout":"space_block"},{"acf_fc_layout":"heading","text":"What is Debtor Days?","level":"h2"},{"acf_fc_layout":"paragraph","content":"

Debtor Days, also known as Days Sales Outstanding (DSO), is a metric representing the average time in days that a business takes to collect revenue after a sale has been made on credit. This metric is critical for assessing a company’s liquidity and operational efficiency.

\n"},{"acf_fc_layout":"paragraph","content":"

The role of Debtor Days in managing cash flow cannot be overstated. A lower number of Debtor Days (or Days Sales Outstanding) indicates that a company is collecting its receivables more quickly, which improves cash flow and provides funds for daily operations, investment, and debt repayment.

\n"},{"acf_fc_layout":"space_block"},{"acf_fc_layout":"heading","text":"Debtor Days Formula","level":"h2"},{"acf_fc_layout":"paragraph","content":"

To calculate your Debtor Days, you have several options:

\n"},{"acf_fc_layout":"ordered_list","items":[{"text":"The simple method"},{"text":"The count-back method"},{"text":"

The automated method

"}]},{"acf_fc_layout":"heading","text":"1 - The Simple Method of Calculating Debtor Days","level":"h3"},{"acf_fc_layout":"paragraph","content":"

Calculating debtor days involves a straightforward formula:

\n"},{"acf_fc_layout":"image","image":"https://cms.upflow.dev.3codes.io/wp-content/uploads/2024/11/Debtor-Days-formula-1.png","caption":""},{"acf_fc_layout":"paragraph","content":"

To calculate it, you need to divide your AR at the end of the period by your gross revenues over the same period. You then multiply this number by the number of days in the period.

\n"},{"acf_fc_layout":"paragraph","content":"

Example Calculation

\n"},{"acf_fc_layout":"paragraph","content":"

For instance, if a company has an average accounts receivable of £50,000, gross revenue of £600,000, and the period in question is 365 days, the debtor days would be calculated as follows:

\n"},{"acf_fc_layout":"paragraph","content":"

Debtor Days = (£50,000 / £600,000) * 365 = 30.42 days

\n"},{"acf_fc_layout":"paragraph","content":"

This indicates that it takes approximately 30 days on average to collect the receivables.

\n"},{"acf_fc_layout":"space_block"},{"acf_fc_layout":"heading","text":"2 - The Count-back Method of Calculating Debtor Days","level":"h3"},{"acf_fc_layout":"paragraph","content":"

The Count-back method provides a more precise calculation of Debtor Days by assessing accounts receivable and gross sales on a month-by-month basis. Here’s how it works:

\n"},{"acf_fc_layout":"ordered_list","items":[{"text":"

Compare A/R to monthly gross sales: Begin by comparing your accounts receivable (A/R) to your gross sales for each month.

If A/R exceeds gross sales: Add the number of days in the month to your Debtor Days count. For the next month, subtract the month's gross sales from your A/R.
If gross sales exceed A/R: Calculate the ratio of A/R to gross sales and multiply this by the number of days in the month.

"},{"text":"Accumulate Days: Continue this process month-by-month until gross sales exceed accounts receivable. The total days accumulated represent your debtor days."}]},{"acf_fc_layout":"paragraph","content":"

Example Calculation

\n"},{"acf_fc_layout":"paragraph","content":"

Let’s assume the following monthly data:

\n"},{"acf_fc_layout":"bullet_list","items":[{"text":"November: A/R is £10,000, and gross sales are £3,000. Since A/R exceeds gross sales, add 30 days to your debtor days count. Adjust A/R to £7,000 for October (£10,000 - £3,000)."},{"text":"October: A/R is now £7,000, and gross sales are £2,500. Add 31 days to your debtor days count, totalling 61 days so far. Adjust A/R to £4,500 (£7,000 - £2,500) for September."},{"text":"September: In September, gross sales of £5,000 finally exceed the adjusted A/R of £4,500. Calculate the debtor days for September using the ratio of A/R to gross sales: ( frac{4,500}{5,000} times 30 = 27 ) days."}]},{"acf_fc_layout":"paragraph","content":"

Summing all these, the total is 61 + 27 = 88 debtor days for the period.

\n"},{"acf_fc_layout":"space_block"},{"acf_fc_layout":"heading","text":"3 - Automated Tools for Debtor Days Calculation","level":"h3"},{"acf_fc_layout":"paragraph","content":"

If you’re seeking to streamline your financial processes, automated tools for calculating Debtor Days offer a significant advantage. Upflow, for instance, offers a lifetime free discover plan that gives you instant visibility into your Debtor Days, integrating directly with your invoicing system and automating the count-back method. This allows you to:

\n"},{"acf_fc_layout":"bullet_list","items":[{"text":"Maintain accuracy: Automate Debtor Days calculations and minimize human errors."},{"text":"Save time: Focus on strategic financial management rather than routine calculations."},{"text":"Gain real-time insights: Quickly adapt to changes in your accounts receivable status with up-to-date data displayed on a user-friendly dashboard."}]},{"acf_fc_layout":"paragraph","content":"

By leveraging tools like Upflow, you can effortlessly track and manage debtor days, ensuring that you have accurate and timely data at your fingertips to make informed financial decisions.

\n"},{"acf_fc_layout":"paragraph","content":"

Understanding and implementing these advanced methods for calculating Debtor Days will enhance your business’s cash flow management and credit control processes, thereby improving financial health. Want to calculate your debtor days or DSO now? Download our free DSO calculator spreadsheet

\n"},{"acf_fc_layout":"hubspot_cta","id":"3f44d79a-b614-418a-811b-1384592bac47","alt":"Calculate debtor days"},{"acf_fc_layout":"paragraph","content":"

With your debtor days calculated, you might be wondering what qualifies as a “good” number. Like many metrics, the ideal figure varies—while the purpose of debtor days remains consistent, what counts as a healthy number depends on the industry. So now lets take a look at the median debtor days/DSO of various industries

\n"},{"acf_fc_layout":"space_block"},{"acf_fc_layout":"heading","text":"Debtor Days by Industry","level":"h2"},{"acf_fc_layout":"image","image":"https://cms.upflow.dev.3codes.io/wp-content/uploads/2024/11/debtor-days-by-Industry.png","caption":""},{"acf_fc_layout":"paragraph","content":"

To help you better interpret your debtor days we analysed the median debtor days/DSO of various industries in our State of B2B Payments in 2024 report.

\n"},{"acf_fc_layout":"paragraph","content":"$60"},{"acf_fc_layout":"space_block"},{"acf_fc_layout":"heading","text":"How to Reduce your Debtor Days?","level":"h2"},{"acf_fc_layout":"paragraph","content":"

To effectively reduce debtor days and improve cash flow, consider these strategies:

\n"},{"acf_fc_layout":"ordered_list","items":[{"text":"

Implement Clear Payment Terms

Define and communicate payment terms upfront. Ensure that clients understand due dates, payment methods, and any penalties for late payments.

"},{"text":"

Optimize Invoicing Processes

Use automated invoicing software to send accurate and timely invoices immediately after goods or services are delivered. Include clear details to minimize back-and-forth.

"},{"text":"

Incentivize Early Payments

Offer discounts for early payments, such as a 2% discount for payments made within 10 days, to encourage prompt payments and reduce the average collection period.

"},{"text":"

Use Automated Reminders

Set up automated reminders for approaching and overdue invoices. These reminders can help keep your receivables top of mind for customers without requiring manual follow-up.

"},{"text":"

Strengthen Credit Policies

Conduct credit checks on new clients and regularly review the creditworthiness of existing customers. Limiting credit to high-risk clients can reduce overdue receivables.

"},{"text":"

Consider Flexible Payment Options

Offer multiple payment methods, including online options, to make it easier for clients to pay on time. Consider installment options if cash flow is a common challenge among customers.

"}]},{"acf_fc_layout":"space_block"},{"acf_fc_layout":"heading","text":"How can Upflow help?","level":"h2"},{"acf_fc_layout":"paragraph","content":"

Businesses that focus on reducing Debtor Days often experience significant improvements in operational efficiency and financial stability. A compelling example of this is Hokodo, a UK FinTech company that faced challenges with manual accounts receivable processes and a decentralized collection strategy.

\n"},{"acf_fc_layout":"paragraph","content":"

By implementing Upflow, Hokodo centralized its A/R management and automated many of its processes, which led to a remarkable 75% decrease in Debtor Days, significantly boosting cash flow and financial stability.

\n"},{"acf_fc_layout":"paragraph","content":"

Moreover, this automation enabled Hokodo to save on hiring costs, demonstrating the substantial ROI that effective Debtor Days management can bring to a growing company. This case underlines how strategic improvements in A/R processes can directly contribute to a business’s financial health and operational efficiency.

In your exploration of enhancing accounts receivable management, consider the insights from our framework on the 5 stages of cash collection maturity. In this resource, Alex Louisy, CEO of Upflow, outlines a strategic path from basic practices to fully automated systems, offering a vital roadmap for businesses seeking to improve their cash flow and reduce Debtor Days.

\n"},{"acf_fc_layout":"hubspot_cta","id":"5dce7b06-14d0-4a82-a83c-2c25ba953ea2","alt":"Discover Upflow for Free"},{"acf_fc_layout":"space_block"},{"acf_fc_layout":"heading","text":"Key Takeaways","level":"h2"},{"acf_fc_layout":"bullet_list","items":[{"text":"Debtor Days or DSO, is a key metric for assessing how long it takes a business to collect payments after a sale on credit. Lower Debtor Days can significantly enhance cash flow, enabling smoother daily operations and investments."},{"text":"There are 2 main methods to calculate Debtor Days: the simple method and the count-back method. It is advised to use automated tools like Upflow to calculate debtor days, which also provide real-time insights for improved financial management."},{"text":"Industries vary widely in Debtor Days; traditional sectors often see longer cycles, while industries like retail have faster payments due to inventory dependencies."},{"text":"Effective strategies to reduce Debtor Days include clear payment terms, optimized invoicing, early payment incentives, automated reminders, and strong credit policies."},{"text":"Automating Debtor Days tracking improves accuracy, saves time, and enables quick decision-making for better cash collection management."}]}],"primary_category":{"term_id":393,"name":"Reduce DSO","slug":"reduce-dso","term_group":0,"term_taxonomy_id":116,"taxonomy":"category","description":"DSO is a crucial metric to track: it indicates how long it takes you to get paid by your clients. The closer it is to your payment terms, the better. Here you'll find articles and resources to help you reduce your DSO and get your business on the right track.","parent":0,"count":9,"filter":"raw"},"related_author_id":10615,"right_sidebar_call_to_action_id":"","right_sidebar_call_to_action_alt":"","date_modified":"29/07/2026","og_image":false,"og_title":"","og_description":"","canonical_mode":"auto","x_default_mode":"auto","noindex":false,"nofollow":false,"_taxonomies":{"category":[{"id":374,"name":"AR metrics","slug":"ar-metrics","description":"Tracking your receivable KPIs is crucial to mesure the efficiency of your cash collection. But which metric should you track? And how can you calculate and improve them? Have a look at our dedicated articles.","parent":null},{"id":393,"name":"Reduce DSO","slug":"reduce-dso","description":"DSO is a crucial metric to track: it indicates how long it takes you to get paid by your clients. The closer it is to your payment terms, the better. Here you'll find articles and resources to help you reduce your DSO and get your business on the right track.","parent":null}],"translation_priority":[{"id":11,"name":"Optional","slug":"optional","description":"","parent":null}]}},"publishedAt":"November 12, 2024","publishedAtIso":"2024-11-12T01:00:00Z","modifiedAtIso":"$undefined"},{"title":"Net Credit Sales: Formula, Calculation & Financial Insights","description":"Learn how to calculate net credit sales with formulas and examples. Understand its impact on the balance sheet, AR turnover and other financial statements.","image":"https://cms.upflow.dev.3codes.io/wp-content/uploads/2024/10/net-credit-sales.png","imageAlt":"","fields":{"link":"/blog/ar-metrics/net-credit-sales","_taxonomies":{"article_type":[{"id":374,"name":"AR metrics","slug":"ar-metrics","description":""}]},"author":{"name":"Quentin Gaudinat","image":"https://cms.upflow.dev.3codes.io/wp-content/uploads/2026/07/4-1.png","description":"

About the Author

\n","position":"Global Sales Director at Upflow","slug":"quentin"}},"acf":{"seo_title":"Net Credit Sales: Formula, Calculation & Financial Insights","seo_description":"Learn how to calculate net credit sales with formulas and examples. Understand its impact on the balance sheet, AR turnover and other financial statements.","body":[{"acf_fc_layout":"paragraph","content":"

In the world of business accounting, understanding your company’s revenue streams is essential for financial management and decision-making. One key component often overlooked is net credit sales, which represents sales where customers agree to pay on a later date. For businesses that offer credit to customers, this figure is crucial as it directly impacts cash flow, liquidity, and accounts receivable management. In this blog, we’ll explore:

\n"},{"acf_fc_layout":"bullet_list","items":[{"text":"What Are Net Credit Sales?"},{"text":"Net Credit Sales Formula"},{"text":"Net Credit Sales Calculation Example"},{"text":"Net Credit Sales on the Balance Sheet"},{"text":"Net Credit Sales on Financial Statements & Ratios"}]},{"acf_fc_layout":"paragraph","content":"

At Upflow, we’re committed to transforming your credit sales into cash flow, ensuring you get paid on time. Click the banner below to connect with our cash collection experts and craft a personalized collection strategy for your business.

\n"},{"acf_fc_layout":"hubspot_cta","id":"8df0d460-70d0-40c2-bea0-b8236477d27a","alt":"book a demo"},{"acf_fc_layout":"space_block"},{"acf_fc_layout":"heading","text":"What Are Net Credit Sales?","level":"h2"},{"acf_fc_layout":"paragraph","content":"

Net credit sales refer to the total revenue generated from sales made on credit, excluding any returns, allowances, or discounts offered to customers. Unlike cash sales, where payment is received upfront, net credit sales involve deferred payment, which can affect a company’s cash flow and financial stability.

\n"},{"acf_fc_layout":"paragraph","content":"

The importance of net credit sales lies in its ability to reflect a company’s sales activity while accounting for customer returns and discounts, providing a clearer picture of actual revenue generated from credit transactions. For businesses that extend credit to their customers, accurately tracking net credit sales is essential for effective financial management and decision-making.

\n"},{"acf_fc_layout":"heading","text":"Net Credit Sales Formula","level":"h2"},{"acf_fc_layout":"paragraph","content":"

To calculate net credit sales, we deduct the sales returns, sales allowances and discounts from the gross credit sales. This is what the formula looks like:

\n"},{"acf_fc_layout":"image","image":"https://cms.upflow.dev.3codes.io/wp-content/uploads/2024/11/Net-Credit-Sales-formula-1.png","caption":""},{"acf_fc_layout":"paragraph","content":"

Components of the Formula:

\n"},{"acf_fc_layout":"bullet_list","items":[{"text":"Gross Credit Sales: This figure represents the total sales made on credit during a specified period before any deductions. It includes all credit transactions without consideration for returns or discounts."},{"text":"Sales Returns: This amount accounts for products that customers return after purchase. Subtracting sales returns ensures that the net credit sales reflect only the sales that resulted in actual revenue."},{"text":"Sales Allowances: These are reductions in the selling price granted to customers, often due to defects or dissatisfaction with the product. They also need to be deducted from gross credit sales to achieve an accurate figure."},{"text":"Discounts: This includes any discounts offered to customers for early payment or promotional reasons. Like returns and allowances, these discounts must be subtracted to determine the net credit sales accurately."}]},{"acf_fc_layout":"paragraph","content":"

Want to calculate and track your net credit sales in an more organized manner? Click on the banner below to download our free net credit sales calculator spreadsheet

\n"},{"acf_fc_layout":"hubspot_cta","id":"000b08ed-ae19-4fdf-bb41-6be785dfb5f6","alt":"Net Credit Sales Calculator"},{"acf_fc_layout":"space_block"},{"acf_fc_layout":"heading","text":"Net Credit Sales Calculation Example","level":"h2"},{"acf_fc_layout":"paragraph","content":"

Let’s explore net credit sales with a real-world scenario:

\n"},{"acf_fc_layout":"paragraph","content":"

Imagine your business generates $50,000 in gross credit sales during the month. However, one customer returns $4,000 worth of goods due to quality issues, and another is granted a $1,500 sales allowance because of a pricing error. Additionally, you offered a 2% early payment discount to incentivize prompt payment, and a few customers took advantage, totaling $800 in discounts.

\n"},{"acf_fc_layout":"paragraph","content":"

Here’s how the calculation breaks down:

\n"},{"acf_fc_layout":"bullet_list","items":[{"text":"Gross credit sales: $50,000"},{"text":"Sales returns: $4,000"},{"text":"Sales allowances: $1,500"},{"text":"Discounts: $800"}]},{"acf_fc_layout":"paragraph","content":"

The formula to calculate net credit sales is:

\n"},{"acf_fc_layout":"paragraph","content":"

Net Credit Sales = Gross Credit Sales – Sales Returns – Sales Allowances – Discounts

\n"},{"acf_fc_layout":"paragraph","content":"

Substituting the values:

\n"},{"acf_fc_layout":"paragraph","content":"

Net Credit Sales = $50,000 – $4,000 – $1,500 – $800

\n"},{"acf_fc_layout":"paragraph","content":"

So, your net credit sales for the month would be $43,700. This means the revenue you expect to collect from credit sales, after adjusting for returns, allowances, and discounts, is $43,700.

\n"},{"acf_fc_layout":"heading","text":"Net Credit Sales on the Balance Sheet","level":"h2"},{"acf_fc_layout":"paragraph","content":"

While net credit sales themselves do not directly appear on the balance sheet, they have a critical relationship with certain balance sheet items, particularly accounts receivable. Net credit sales represent revenue generated from credit transactions, which are reflected as accounts receivable on the balance sheet until the payments are collected.

\n"},{"acf_fc_layout":"paragraph","content":"

Here’s how net credit sales relate to key balance sheet components:

\n"},{"acf_fc_layout":"ordered_list","items":[{"text":"

Accounts Receivable

Accounts receivable is the amount of money owed to the business by customers who made purchases on credit. This is the direct link between net credit sales and the balance sheet.

When a company records net credit sales, it increases the accounts receivable balance. Once customers clear their outstanding invoices, accounts receivable decrease, and cash increases, reflecting the movement from credit to actual cash inflow.

"},{"text":"

Bad Debt Allowance

Not all credit sales result in full collection, which leads to an allowance for bad debts. This reflects the estimated amount of credit sales that the company expects will not be collected. The bad debt allowance reduces the value of accounts receivable on the balance sheet, giving a more realistic view of the company’s expected cash inflows.

"},{"text":"

Impact on Working Capital

Net credit sales also influence working capital, which is the difference between a company’s current assets and current liabilities. Since accounts receivable—driven by net credit sales—are part of current assets, higher receivables increase working capital. However, if credit sales are not collected promptly, they can strain cash flow, reducing the company's liquidity even if sales appear strong on paper. Efficient credit collection is essential to maintaining a healthy working capital balance.

"},{"text":"

Cash Flow Considerations

While net credit sales generate revenue, they do not immediately impact cash flow until the receivables are collected. Therefore, a business might see an increase in net credit sales on its income statement, but the balance sheet will reflect this as an increase in accounts receivable, not cash. If receivables remain uncollected over time, this can lead to cash flow challenges, emphasizing the need to convert credit sales into cash to support operational activities.

"}]},{"acf_fc_layout":"heading","text":"Net Credit Sales on Financial Statements & Ratios","level":"h2"},{"acf_fc_layout":"heading","text":"Net Credit Sales on the Income Statement","level":"h3"},{"acf_fc_layout":"paragraph","content":"

It is often asked “Where to find net credit sales on financial statements?” or “The amount of net credit sales is reported on the?” The amount of net credit sales is reported on the income statement under the revenue section. It represents the total revenue generated from sales made on credit, after deducting any returns, allowances, and discounts. This figure is crucial for assessing a company’s sales performance and understanding the effectiveness of its credit policies. A good way to understand this is to know how often does a business collect its receivables and turns credit into cash, that is where the accounts receivable turnover ratio comes in

\n"},{"acf_fc_layout":"heading","text":"Net Credit Sales and the Accounts Receivable Turnover Ratio","level":"h3"},{"acf_fc_layout":"paragraph","content":"

The Accounts Receivable Turnover Ratio is a key financial metric that helps assess how efficiently a company collects its credit sales. It measures how many times, on average, a business collects its accounts receivable during a specific period, typically a year. The ratio provides insight into the company’s credit policies, collection processes, and overall cash flow management.

\n"},{"acf_fc_layout":"paragraph","content":"

The formula for the Accounts Receivable Turnover Ratio is:

\n"},{"acf_fc_layout":"image","image":"https://cms.upflow.dev.3codes.io/wp-content/uploads/2024/11/AR-Turnover-formula-with-Net-Credit-Sales.png","caption":""},{"acf_fc_layout":"paragraph","content":"

In the Accounts Receivable Turnover Ratio formula, net credit sales serve as the numerator, representing the total sales made on credit after accounting for returns, allowances, and discounts. This figure is crucial because it shows the actual revenue the company expects to collect from credit transactions. Using net credit sales provides a more accurate reflection of how well the company converts its receivables into cash, offering a clearer measure of collection efficiency.

\n"},{"acf_fc_layout":"paragraph","content":"

A high accounts receivable turnover ratio indicates that the company is efficient in collecting its credit sales, meaning customers are paying quickly and receivables are being converted into cash frequently. On the other hand, a low ratio suggests that the company may be experiencing delays in collection, potentially leading to cash flow problems and higher bad debt expenses.

\n"},{"acf_fc_layout":"paragraph","content":"

By monitoring the accounts receivable turnover ratio in relation to net credit sales, businesses can identify potential inefficiencies in their collection process or issues with extending credit to customers who are slow to pay.

\n"},{"acf_fc_layout":"paragraph","content":"

You can download our free accounts receivable turnover calculator from the banner below. The spreadsheet will also help you calculate other important AR metrics.

\n"},{"acf_fc_layout":"snippet_block","code":" $\"download$ "},{"acf_fc_layout":"heading","text":"Key Takeaways:","level":"h2"},{"acf_fc_layout":"bullet_list","items":[{"text":"Net credit sales represent the true revenue from credit sales after factoring in returns, allowances, and discounts, offering a clearer view of a company’s actual sales performance."},{"text":"Although net credit sales don't appear directly on the balance sheet, they have a strong impact on accounts receivable, influencing both working capital and liquidity management."},{"text":"Accurately calculating net credit sales ensures better financial reporting and helps assess the effectiveness of a company’s credit and collection policies."},{"text":"The accounts receivable turnover ratio uses net credit sales as the numerator, highlighting how efficiently a company converts credit sales into cash, which directly affects cash flow and financial health."},{"text":"Monitoring net credit sales in conjunction with key financial metrics helps CFOs make informed decisions on credit policies, optimize collection strategies, and mitigate potential cash flow challenges."}]},{"acf_fc_layout":"heading","text":"FAQs","level":"h2"},{"acf_fc_layout":"article_faq","items":[{"question":"What is the Net Credit Sales Formula?","answer":"

This formula to To calculate net credit sales is, Gross credit sales – sales returns – sales allowances – discounts

\n"}]}],"primary_category":{"term_id":374,"name":"AR metrics","slug":"ar-metrics","term_group":0,"term_taxonomy_id":97,"taxonomy":"category","description":"Tracking your receivable KPIs is crucial to mesure the efficiency of your cash collection. But which metric should you track? And how can you calculate and improve them? Have a look at our dedicated articles.","parent":0,"count":27,"filter":"raw"},"right_sidebar_call_to_action_id":"e4fc37a5-4bb8-41bf-b8a5-ba0ad015ab49","right_sidebar_call_to_action_alt":"Free Net Credit Sales Calculator","related_author_id":10653,"date_modified":"29/07/2026","og_image":false,"og_title":"","og_description":"","canonical_mode":"auto","x_default_mode":"auto","noindex":false,"nofollow":false,"_taxonomies":{"category":[{"id":374,"name":"AR metrics","slug":"ar-metrics","description":"Tracking your receivable KPIs is crucial to mesure the efficiency of your cash collection. But which metric should you track? And how can you calculate and improve them? Have a look at our dedicated articles.","parent":null}],"translation_priority":[{"id":11,"name":"Optional","slug":"optional","description":"","parent":null}]}},"publishedAt":"October 23, 2024","publishedAtIso":"2024-10-23T02:00:00Z","modifiedAtIso":"$undefined"},{"title":"5 Key Accounts Receivable Metrics to Assess Your AR Performance","description":"Effective A/R management can play a crucial role in your company’s cash flow. Discover the 5 key metrics to track to improve your collection","image":"https://cms.upflow.dev.3codes.io/wp-content/uploads/2023/06/accounts-receivable-metrics-ar-performance.png","imageAlt":"","fields":{"link":"/blog/ar-metrics/accounts-receivable-metrics-ar-performance","_taxonomies":{"article_type":[{"id":374,"name":"AR metrics","slug":"ar-metrics","description":""}]},"author":{"name":"Alex Louisy","image":"https://cms.upflow.dev.3codes.io/wp-content/uploads/2026/07/7.png","description":"$61","position":"Co-founder and CEO of Upflow","slug":"alexandre"}},"acf":{"seo_title":"5 Key Accounts Receivable Metrics to Assess Your AR Performance","seo_description":"Effective accounts receivable management can play a crucial role in your company's cash flow. Discover the 5 key metrics to track to improve your A/R performance.","body":[{"acf_fc_layout":"paragraph","content":"

The top priorities of companies are to close deals and keep customers happy.

\n"},{"acf_fc_layout":"paragraph","content":"

These don’t always translate into healthy finance. Ultimately, cash is the fuel that powers businesses.

\n"},{"acf_fc_layout":"paragraph","content":"

While most businesses acknowledge this fact, few prioritize effective cash collection. It’s common for companies to measure the number of invoices to assess performance but not keep careful track of whether those invoices are paid on time if paid at all.

\n"},{"acf_fc_layout":"paragraph","content":"

Well… What’s the meaning of making a sale if you don’t get paid promptly for it?

\n"},{"acf_fc_layout":"paragraph","content":"

Effective accounts receivable management can play a crucial role in your company’s cash flow. A CFOs goal needs to be maximizing the companies working capital and liquidity whilst minimizing the number of write-offs.

\n"},{"acf_fc_layout":"paragraph","content":"

The good news is, that you can improve your AR performance helped by the right analytics.

\n"},{"acf_fc_layout":"paragraph","content":"

Days Sales Outstanding is an important metric that gives you a good view of your A/R performance. But it doesn’t have to be the only key metric to consider.

\n"},{"acf_fc_layout":"paragraph","content":"

Today, we’ll be talking about the 5 key AR metrics your business and AR team should be following.

\n"},{"acf_fc_layout":"paragraph","content":"

Remember, most businesses don’t track their AR performance. So no matter what you track, you’ll be going in the right direction if you track at least something.

\n"},{"acf_fc_layout":"hubspot_cta","id":"5dce7b06-14d0-4a82-a83c-2c25ba953ea2","alt":"free analytics platform"},{"acf_fc_layout":"space_block"},{"acf_fc_layout":"heading","text":"1. Days Sales Outstanding","level":"h2"},{"acf_fc_layout":"color_block","content":"

DSO = (Accounts Receivables at the end of the period / Gross revenues over the period) x Number of days in the period

\n"},{"acf_fc_layout":"paragraph","content":"

Days Sales Outstanding is an essential AR metric to track as a key performance indicator. To put it simply, DSO measures how quickly — or slowly — your company collects payments (it calculates the average number of days it takes you to get paid). It’s one of the key metrics you’ll want to share with investors as it shows you’re building a healthy, cash-driven business that’s making a profit.

\n"},{"acf_fc_layout":"paragraph","content":"

A high DSO means it takes a long time for customers to pay. A low one means people pay quickly, so your company has a steady cash flow coming in.

\n"},{"acf_fc_layout":"image","image":"https://cms.upflow.dev.3codes.io/wp-content/uploads/2022/06/dso-widget-1.png","caption":""},{"acf_fc_layout":"paragraph","content":"

There are several methods to calculate your DSO, a simple formula is:

\n"},{"acf_fc_layout":"paragraph","content":"

(Accounts Receivables at the end of the period) / (Gross revenues over the period) * (Number of days in the period)

\n"},{"acf_fc_layout":"color_block","content":"

Example: You DSO is: ($100,000)/($600,000)*(365)= 61 days

\n"},{"acf_fc_layout":"paragraph","content":"

Ideally, DSO won’t exceed your payment terms by more than 50%. This means if you expect clients to pay within 30 days, your DSO should be 45 or below.

\n"},{"acf_fc_layout":"paragraph","content":"

You may not meet this ideal. Most businesses focus on revenue and don’t even track this metric. Without tracking it, you cannot measure progress.

\n"},{"acf_fc_layout":"paragraph","content":"

Regardless of the method, as long as you track DSO consistently and implement efficient account receivable collection processes, you’ll be able to set targets and monitor whether collections efforts are paying off.

\n"},{"acf_fc_layout":"paragraph","content":"

Use our free spreadsheet to calculate your DSO!

\n"},{"acf_fc_layout":"hubspot_cta","id":"ab85080f-1635-4491-b739-2e6fb6f385b7","alt":"Free spreadsheet to calculate A/R metrics"},{"acf_fc_layout":"space_block"},{"acf_fc_layout":"heading","text":"2. Best Possible Days Sales Outstanding ","level":"h2"},{"acf_fc_layout":"color_block","content":"

Best Possible DSO = (Current Accounts Receivable x Gross revenues over the period) / Total Number of Days

\n"},{"acf_fc_layout":"paragraph","content":"

Identifying your best possible DSO is important as a baseline measure to compare to your DSO.

\n"},{"acf_fc_layout":"paragraph","content":"

It considers only current receivables that aren’t past due yet. This distinguishes it from the broader DSO measure, which also includes past-due bills when estimating how long it takes to get paid.

\n"},{"acf_fc_layout":"paragraph","content":"

The best possible DSO is a best-case scenario. It shows how quickly your company will collect if everyone pays their bills on time.

\n"},{"acf_fc_layout":"paragraph","content":"

Ideally, your best possible DSO would equal your DSO. That never happens in practice, though.

\n"},{"acf_fc_layout":"paragraph","content":"

But while some gap between DSO and the best possible DSO is normal, a large discrepancy means your collection process isn’t as effective as it should be.

\n"},{"acf_fc_layout":"paragraph","content":"

Closing that gap involves taking the right steps to implement efficient collection processes.

\n"},{"acf_fc_layout":"paragraph","content":"

We’ve seen substantial improvement when our users implemented systematic receivables processes to ensure all unpaid invoices were followed up with a reminder.

\n"},{"acf_fc_layout":"blockquote","content":"Before Upflow, our DSO was over 64 days. After implementation, our DSO was reduced to below 30 days with a 50% reduction in overdue invoices.","name":"Gregory Labery","title":"Billing Specialist","profil_picture":{"ID":1198,"id":1198,"title":"gregory-side","filename":"gregory-side.png","filesize":215707,"url":"https://cms.upflow.dev.3codes.io/wp-content/uploads/2026/06/gregory-side.png","link":"https://upflow-next.vercel.app/customers/side/attachment/gregory-side/","alt":"","author":"1","description":"","caption":"","name":"gregory-side","status":"inherit","uploaded_to":9277,"date":"2026-06-17 12:37:43","modified":"2026-07-23 13:58:50","menu_order":0,"mime_type":"image/png","type":"image","subtype":"png","icon":"https://cms.upflow.dev.3codes.io/wp-includes/images/media/default.png","width":455,"height":455,"sizes":{"thumbnail":"https://cms.upflow.dev.3codes.io/wp-content/uploads/2026/06/gregory-side-150x150.png","thumbnail-width":150,"thumbnail-height":150,"medium":"https://cms.upflow.dev.3codes.io/wp-content/uploads/2026/06/gregory-side-300x300.png","medium-width":300,"medium-height":300,"medium_large":"https://cms.upflow.dev.3codes.io/wp-content/uploads/2026/06/gregory-side.png","medium_large-width":455,"medium_large-height":455,"large":"https://cms.upflow.dev.3codes.io/wp-content/uploads/2026/06/gregory-side.png","large-width":455,"large-height":455,"1536x1536":"https://cms.upflow.dev.3codes.io/wp-content/uploads/2026/06/gregory-side.png","1536x1536-width":455,"1536x1536-height":455,"2048x2048":"https://cms.upflow.dev.3codes.io/wp-content/uploads/2026/06/gregory-side.png","2048x2048-width":455,"2048x2048-height":455}},"company_name":"Side","company_logo":false},{"acf_fc_layout":"paragraph","content":"

Check out how collection automation helped Side improve its AR process. Read the full customer story here.

\n"},{"acf_fc_layout":"paragraph","content":"

You must be careful, though. Systematic reminders don’t mean flat, impersonal automated emails. Most of the time, these end up in the bin without even being read.

\n"},{"acf_fc_layout":"paragraph","content":"

You need to tailor reminders to your customers’ specificities and avoid impersonal reminders as much as you can. You can, for example, automate the first reminder but send a highly personalized email when a larger account payment becomes late. This will also help understand why payment is late and contribute to your overall financial relationship management

\n"},{"acf_fc_layout":"paragraph","content":"

Are late customer payments piling up? Have a look at our free guide with tips to get paid on time!

\n"},{"acf_fc_layout":"space_block"},{"acf_fc_layout":"heading","text":"3. Average Days Delinquent ","level":"h2"},{"acf_fc_layout":"color_block","content":"

ADD = Days Sales Outstanding – Best Possible Sales Days Outstanding

\n"},{"acf_fc_layout":"paragraph","content":"

Average days delinquent measures how far behind customers typically fall on payments. Specifically, it refers to the average time period between when an invoice was due and when the client paid it. It can be measured across the company’s client database and at an account level to help you identify clients who rarely pay on time.

\n"},{"acf_fc_layout":"paragraph","content":"

ADD isn’t used as a standalone metric. Typically, it’s measured in the long term and coupled with other key metrics, such as DSO, to help you assess whether collections efforts are trending in a positive direction. The two performance metrics should most often work in tandem, although that won’t necessarily be the case if a change in payment terms or another shift occurs.

\n"},{"acf_fc_layout":"paragraph","content":"

For example, if a large outstanding invoice is finally paid, the ADD will quickly improve. However, that doesn’t mean your collection has suddenly become effective.

\n"},{"acf_fc_layout":"paragraph","content":"

That’s why you shouldn’t look at your ADD in a snapshot. Instead, calculate it over time and evaluate it along with DSO. This will help you better understand the trend of your AR performance.

\n"},{"acf_fc_layout":"space_block"},{"acf_fc_layout":"heading","text":"4. Collections Effectiveness Index ","level":"h2"},{"acf_fc_layout":"color_block","content":"

CEI = [(Initial Receivables + Monthly Sales – Total Receivables at End the Period) / (Initial Receivables + Monthly Sales – Receivables for the Current Period)] x 100

\n"},{"acf_fc_layout":"paragraph","content":"

Collections Effectiveness Index, or CEI measures in percentage your ability to get funds from customers within a given period. It’s typically calculated monthly, although you can choose to track it over any period you like.

\n"},{"acf_fc_layout":"paragraph","content":"

The closest this percentage is to 100%, the best. Although a perfect 100 is theoretically possible if your collections efforts are flawless, in general, this number should be above 80%.

\n"},{"acf_fc_layout":"color_block","content":"

Let’s take an example:Your receivables at the end of the month will be: Current Month Sales – Payments Received on the Current Month Receivable = $20,000And the total Receivables Balance at the end of the month will be: Receivable beginning of the month + Current month Sales – Payments Received for Outstanding Receivables – Payments Received on the Current Month Receivable = $60,000Then, you can apply the above formula:($100,000 + $40,000 – $60,000) / ($100,000 + $40,000 – $20,000) x 100 = 67%

\n"},{"acf_fc_layout":"paragraph","content":"

We’ve prepared an excel spreadsheet to help you calculate this every month!

\n"},{"acf_fc_layout":"hubspot_cta","id":"314f9f87-7e88-42dc-bfc1-d510ec0ec1b4","alt":"CEI Calculator"},{"acf_fc_layout":"space_block"},{"acf_fc_layout":"paragraph","content":"

While DSO is focused on how long it takes for your company to get paid, CEI (collection effectiveness index) considers the amount of outstanding invoices and measures how effectively your company collects total payments due.

\n"},{"acf_fc_layout":"paragraph","content":"

Some AR metrics can be compared with competitors to assess how quickly your company collects payments relative to the industry’s average. CEI isn’t used for this type of benchmarking against peers. Instead, it’s an internal measure of the A/R teams’ performance. Check out the table below and see how your business’s DSO compares to the industry median.

\n"},{"acf_fc_layout":"image","image":"https://cms.upflow.dev.3codes.io/wp-content/uploads/2025/12/DSO-by-Industry-1.png","caption":""},{"acf_fc_layout":"space_block"},{"acf_fc_layout":"heading","text":"5. Accounts Receivable Turnover Ratio","level":"h2"},{"acf_fc_layout":"color_block","content":"

Turnover Ratio = Net Average Credit Sales / Average Accounts Receivable

\n"},{"acf_fc_layout":"paragraph","content":"

This metric assesses how effectively your company manages credit and how quickly your clients pay their bills. A higher ratio is preferred and suggests your A/R team is efficient and that your clients repay debts rapidly.

\n"},{"acf_fc_layout":"color_block","content":"

Let’s take an example: Here, your A/R turnover ratio is $100,000/$10,000 = 10.By dividing the number of days of that period by the A/R turnover ratio, you can calculate your average collection period. In our example, your average collection period would be 365 / 10 = 36.5 days.

\n"},{"acf_fc_layout":"paragraph","content":"

A good AR turnover ratio is generally high and indicates that you have an efficient collections process. However, you may want to capture sales ahead of the competition or keep clients in dire economic situations. There, it won’t be a priority to have a higher ratio.

\n"},{"acf_fc_layout":"paragraph","content":"

For a deeper understanding of this metric, check out our article on the Accounts Receivable Turnover Ratio.

\n"},{"acf_fc_layout":"heading","text":"How to Analyze and KPIs you Should be Tracking","level":"h2"},{"acf_fc_layout":"paragraph","content":"

Each account receivable metric requires you to collect substantial data, with accuracy. You’ll also want to collect the data consistently over time to compare your performance and identify how changes and optimizations impact your receivable performance.

\n"},{"acf_fc_layout":"paragraph","content":"

Excel spreadsheets have the advantage of being cost-free, but they are limited when it comes to keeping track of advanced analytics. Your time is valuable and should be spent on higher value-added activities, like resolving an overdue payment dispute or lowering your bad debt, instead of focusing on making calculations that could easily be automated (removing the human error factor too!).

\n"},{"acf_fc_layout":"paragraph","content":"

At Upflow, we’ve developed a free plan, Discover Upflow, which connects directly to your existing billing software. In 2 clicks, our system automatically generates reports of your most important Accounts Receivable KPIs such as DSO, Main debtors, Aging balance, Cash flow, or Billing cohorts. Make data-driven decisions to increase your collections performance.

\n"},{"acf_fc_layout":"image","image":"https://cms.upflow.dev.3codes.io/wp-content/uploads/2023/02/Dashboard-scaled.png","caption":""},{"acf_fc_layout":"paragraph","content":"

Need a big-picture view of all of your accounts-receivable data? Check out our free Discover Plan by Upflow.

\n"},{"acf_fc_layout":"space_block"},{"acf_fc_layout":"hubspot_cta","id":"eed4ccd6-5fb9-494d-8bba-c73d99199d77","alt":"Analytics by Upflow"},{"acf_fc_layout":"heading","text":"Key takeaways ","level":"h2"},{"acf_fc_layout":"bullet_list","items":[{"text":" Accounts receivable management plays a crucial role in a company's cash flow, and effective management can help maximize working capital and liquidity while minimizing write-offs."},{"text":"Days Sales Outstanding (DSO) is an important metric to track as it measures how quickly a company collects payments, and it's a key metric to share with investors as it shows a healthy, cash-driven business."},{"text":"The DSO formula is (Accounts Receivables at the end of the period) / (Gross revenues over the period) * (Number of days in the period). Ideally, DSO should not exceed payment terms by more than 50%."},{"text":"Best Possible Days Sales Outstanding (BPDSO) is another important metric to track as it is a baseline measure to compare to DSO. BPDSO considers only current receivables that aren't past due yet and is a best-case scenario of how quickly a company will collect if all bills are paid on time."},{"text":"It's important to track these metrics in real time. Use Accounts Receivable automation software like Upflow to help you do this with its AR dashboard. "}]},{"acf_fc_layout":"heading","text":"FAQs","level":"h2"},{"acf_fc_layout":"article_faq","items":[{"question":"What’s the difference between DSO and Best Possible DSO (BPDSO)?","answer":"

DSO includes both current and overdue receivables and shows how long it typically takes your company to get paid. Best Possible DSO (BPDSO), on the other hand, only considers current (not overdue) receivables, representing a best-case scenario where all customers pay on time. Comparing the two helps you identify gaps in your collection process and opportunities to improve cash flow efficiency.

\n"}]}],"primary_category":{"term_id":374,"name":"AR metrics","slug":"ar-metrics","term_group":0,"term_taxonomy_id":97,"taxonomy":"category","description":"Tracking your receivable KPIs is crucial to mesure the efficiency of your cash collection. But which metric should you track? And how can you calculate and improve them? Have a look at our dedicated articles.","parent":0,"count":27,"filter":"raw"},"right_sidebar_call_to_action_id":"fa9d10f7-dd76-4797-9f51-15d35b9b6cfe","right_sidebar_call_to_action_alt":"Financial Relationship Management","related_author_id":10619,"date_modified":"29/07/2026","og_image":false,"og_title":"","og_description":"","canonical_mode":"auto","x_default_mode":"auto","noindex":false,"nofollow":false,"_taxonomies":{"category":[{"id":374,"name":"AR metrics","slug":"ar-metrics","description":"Tracking your receivable KPIs is crucial to mesure the efficiency of your cash collection. But which metric should you track? And how can you calculate and improve them? Have a look at our dedicated articles.","parent":null}],"translation_priority":[{"id":11,"name":"Optional","slug":"optional","description":"","parent":null}]}},"publishedAt":"June 5, 2023","publishedAtIso":"2023-06-05T02:00:00Z","modifiedAtIso":"$undefined"},{"title":"5 Tips to Track Your Accounts Receivable Effectively","description":"A/R tracking is essential at a time of economic uncertainty. Doing it effectively leads to better cash flow management, which is a priority whether you’re a small business or a corporation.","image":"https://cms.upflow.dev.3codes.io/wp-content/uploads/2023/06/accounts-receivable-tracking.png","imageAlt":"","fields":{"link":"/blog/ar-metrics/accounts-receivable-tracking","_taxonomies":{"article_type":[{"id":374,"name":"AR metrics","slug":"ar-metrics","description":""}]},"author":{"name":"Alexandre Antoine","image":"https://cms.upflow.dev.3codes.io/wp-content/uploads/2026/07/9-1.png","description":"

\n","position":"Finance Director at Upflow","slug":"alex-finance-director"}},"acf":{"seo_title":" 5 Tips to Track Your Accounts Receivable Effectively","seo_description":"In order to not only survive but thrive in the current climate, we’re giving you 5 tips to make your accounts receivable tracking more effective. ","body":[{"acf_fc_layout":"paragraph","content":"

A/R tracking is essential at a time of economic uncertainty. Doing it effectively leads to better cash flow management, which is a priority whether you’re a small business or a corporation.

\n"},{"acf_fc_layout":"paragraph","content":"

The alternative? Risking a cash crunch, which could lead to bankruptcy. In order to not only survive, but thrive in the current climate, we’re giving you 5 tips to make your accounts receivable tracking more effective.

\n"},{"acf_fc_layout":"paragraph","content":"

Towards the end, we also give you concrete examples of how A/R tracking can impact your cash flow positively

\n"},{"acf_fc_layout":"paragraph","content":"

One of these tips is to use a solution like Upflow: our A/R software comes with analytics features that help you track your progress. By automating part of your AR tasks, you can focus on higher-value actions, like planning for your growth

\n"},{"acf_fc_layout":"hubspot_cta","id":"8df0d460-70d0-40c2-bea0-b8236477d27a","alt":"request a demo"},{"acf_fc_layout":"space_block"},{"acf_fc_layout":"heading","text":"1 - Improve Your Billing Processes.","level":"h2"},{"acf_fc_layout":"space_block"},{"acf_fc_layout":"paragraph","content":"

Our first tip to more effective accounts receivable tracking is to look at your billing process. How do you send your invoices to your clients? Better customer invoice tracking means better A/R tracking!

\n"},{"acf_fc_layout":"paragraph","content":"

Looking at both the internal and external sides of your process is important, as both parts can be streamlined.

\n"},{"acf_fc_layout":"space_block"},{"acf_fc_layout":"heading","text":"Streamline Your Invoicing Workflow.","level":"h3"},{"acf_fc_layout":"space_block"},{"acf_fc_layout":"paragraph","content":"

Creating internal processes means you have an easy-to-follow, efficient way of doing things in your company. This applies to your invoicing or billing process as well. It seems obvious, but some business owners and finance professionals forget to do this – or to review them regularly.

\n"},{"acf_fc_layout":"paragraph","content":"

Depending on your business model and payment methods, there are several ways to improve your billing processes. Here are a few general ideas:

\n"},{"acf_fc_layout":"bullet_list","items":[{"text":"Set up clear payment policies and processes: as your company evolves, so do your payment processes. Everyone in your company should know where you stand and what the processes are, with easily-accessible documentation that explain them. Allocating responsibilities makes for more efficient processes too."}]},{"acf_fc_layout":"bullet_list","items":[{"text":"Think collaboration: invoicing isn’t the sole responsibility of your finance / accounting department. At Upflow for example, our sales team is involved in the invoicing process.

When several people are involved, bringing in collaborative processes and tools is even more necessary. Supporting your whole company through the invoicing process will make for better (and easier!) tracking. "}]},{"acf_fc_layout":"bullet_list","items":[{"text":"Make it a priority: accounts receivable tracking should be a discipline just like bookkeeping. Discuss the topic regularly with your team, and even encourage the relevant people to block off some time to work on it.

Allocating time and resources to your accounts receivable tracking means you’ll be able to be proactive about the matter, week after week. That’s key to prevent any bad debts from occurring and focus on your growth. "}]},{"acf_fc_layout":"space_block"},{"acf_fc_layout":"heading","text":"Use the Right Billing Tool.","level":"h3"},{"acf_fc_layout":"space_block"},{"acf_fc_layout":"paragraph","content":"

The best way to deal with your invoices is to use the right billing software for your business. Even for freelancers or small business owners, a billing tool will help you send and track invoices easily.

\n"},{"acf_fc_layout":"paragraph","content":"

An online invoicing tool will save you time on the actual sending of invoices (they help with invoice and email templates). They also help with your accounts receivable tracking, displaying a list of your outstanding invoices.

\n"},{"acf_fc_layout":"paragraph","content":"

Some tools include a direct payment feature too, which means your clients can pay straight through the application. If your billing tool is connected to your accounting software (which we strongly recommend), your operations are then automatically counted as a journal entry there.

\n"},{"acf_fc_layout":"paragraph","content":"

Most also offer a dashboard with several analytics, calculating the amount of money that came in over a time period at the very minimum.

\n"},{"acf_fc_layout":"paragraph","content":"

In a nutshell: billing software makes it easier for your clients to pay you, but also for you to track your accounts receivable more effectively.

\n"},{"acf_fc_layout":"space_block"},{"acf_fc_layout":"heading","text":"2- Centralize Your Financial Data.","level":"h2"},{"acf_fc_layout":"space_block"},{"acf_fc_layout":"paragraph","content":"

When it comes to your accounts receivable tracking, having one source of truth makes your job much easier – and more accurate, too. That’s possible by working in an open ecosystem.

\n"},{"acf_fc_layout":"space_block"},{"acf_fc_layout":"heading","text":"Getting the Most Accurate Data.","level":"h3"},{"acf_fc_layout":"space_block"},{"acf_fc_layout":"paragraph","content":"

Centralizing your data within a space means using one tool as a reference. It is the one you turn to when you want to check your KPIs, create reports, or follow through on your outstanding invoices.

\n"},{"acf_fc_layout":"paragraph","content":"

Having one point of reference means you always have the latest data available. It is essential to make informed decisions, short-term and long term.

\n"},{"acf_fc_layout":"paragraph","content":"

We recommend you pick a tool or software to use as your one source of truth, and stick with it. Of course, for it to work, it needs to be updated regularly. The best option for doing this is to use software.

\n"},{"acf_fc_layout":"space_block"},{"acf_fc_layout":"heading","text":"Using Automated Tools.","level":"h3"},{"acf_fc_layout":"space_block"},{"acf_fc_layout":"paragraph","content":"

A/R automated software will gather all the relevant data and display it in real-time. It is connected to your existing tech stack, that is to say your accounting software, billing tool, and even your CRM. You can think of it as a super accounting system.

\n"},{"acf_fc_layout":"paragraph","content":"

You can pick one of your existing software as your one source of truth, or choose a dedicated new A/R software with the features you need (like, hey, Upflow!).

\n"},{"acf_fc_layout":"paragraph","content":"

Whatever you pick: stop using spreadsheets for your accounts receivable tracking! They are time consuming, error-prone, and a nightmare to keep up-to-date. If you want to have more efficient A/R tracking, you need to work with more efficient tools.

\n"},{"acf_fc_layout":"paragraph","content":"

When it comes to your accounts receivable, it is essential to work in an integrated environment. Having your software interconnected means information flows freely and is always readily available.

\n"},{"acf_fc_layout":"paragraph","content":"

If you use Xero or Quickbooks for example, you can integrate them with Upflow so all your operations are automatically synchronized from one to the other – no need to add each journal entry! Your accounts receivable tracking will get faster and more efficient for it.

\n"},{"acf_fc_layout":"paragraph","content":"

Your finance tech stack should therefore be open and easy to integrate with third-party apps. That’s the best option for you now, but also as you grow and add new pieces to your finance system.

\n"},{"acf_fc_layout":"space_block"},{"acf_fc_layout":"heading","text":"3- Focus on the Right KPIs. ","level":"h2"},{"acf_fc_layout":"space_block"},{"acf_fc_layout":"paragraph","content":"

If you want to improve your accounts receivable process, you need to know which metrics matter most for your business. Spoiler: they all have to do with improving your cash flow!

\n"},{"acf_fc_layout":"paragraph","content":"

Need help tracking key metrics? Check out our free spreadsheet!

\n"},{"acf_fc_layout":"hubspot_cta","id":"ab85080f-1635-4491-b739-2e6fb6f385b7","alt":"cta download spreadsheet"},{"acf_fc_layout":"space_block"},{"acf_fc_layout":"heading","text":"Which Accounts Receivable Metrics to Track. ","level":"h3"},{"acf_fc_layout":"space_block"},{"acf_fc_layout":"paragraph","content":"

While we recommend fast-growing companies to track more KPIs, these are the essential ones every business should start looking at:

\n"},{"acf_fc_layout":"heading","text":"Days Sales Outstanding.","level":"h4"},{"acf_fc_layout":"paragraph","content":"

Your DSO is the average number of days it takes on average for your clients to pay you.

\n"},{"acf_fc_layout":"paragraph","content":"

You can calculate it using:

\n"},{"acf_fc_layout":"bullet_list","items":[{"text":"The simple method, which calculates an average over a time period."},{"text":"The countback method, which goes back in time and leads to more accurate results. "}]},{"acf_fc_layout":"paragraph","content":"

Regardless of the formula you use, you want your DSO to be as close to your payment terms as possible: 0 if you expect immediate payment, or 30 days if you offer Net 30.

\n"},{"acf_fc_layout":"paragraph","content":"

If your DSO is higher than that, it means your clients are paying their invoices way past their due dates. That endangers your cash flow as you have payables and expenses to pay yourself. Improving your DSO and cash flow is key for a steadily growing company.

\n"},{"acf_fc_layout":"heading","text":"Aging Report","level":"h4"},{"acf_fc_layout":"paragraph","content":"

While this isn’t an account receivable ratio per se, your aging report has a lot of insights to give you. They’re a visual representation of your invoices, categorized by due dates.

\n"},{"acf_fc_layout":"paragraph","content":"

At a glance, you can gauge in which categories your outstanding invoices are accumulating. The 60 to 90-day category is one to watch out for, as it indicates a potential future cash flow problem.

\n"},{"acf_fc_layout":"paragraph","content":"

It’s a very useful report to have at hand because it helps you prioritize your efforts. You can take action where it’s most needed and stir your company’s finances in the right direction.

\n"},{"acf_fc_layout":"space_block"},{"acf_fc_layout":"heading","text":"How to Create the Best Analytics Dashboard. ","level":"h3"},{"acf_fc_layout":"space_block"},{"acf_fc_layout":"paragraph","content":"

Your dashboard is where you track accounts receivable metrics. How to best track your accounts receivable KPIs depends on your business: the best dashboard is one that makes sense to you (i.e. it has relevant metrics).

\n"},{"acf_fc_layout":"paragraph","content":"

Use automated dashboards if you don’t want to spend your time calculating ratios. It can either be through a specialized dashboard software, or through the analytics features of your billing or accounting software.

\n"},{"acf_fc_layout":"paragraph","content":"

Upflow has advanced analytics features where you can specifically track your A/R metrics. You can follow your A/R progress and take action to improve it directly through our online application.

\n"},{"acf_fc_layout":"paragraph","content":"

Once more, it’s important that all your info is centralized and synchronized if you want your data, reports, and decisions to be relevant.

\n"},{"acf_fc_layout":"heading","text":"4. Use Specialized Accounts Receivable Software.","level":"h2"},{"acf_fc_layout":"space_block"},{"acf_fc_layout":"paragraph","content":"

If you’re serious about your accounts receivable tracking, then consider using a tool that’s designed for that. It will make your life easier, and your processes more efficient.

\n"},{"acf_fc_layout":"space_block"},{"acf_fc_layout":"heading","text":"A/R software has the features you need for efficient tracking.","level":"h3"},{"acf_fc_layout":"space_block"},{"acf_fc_layout":"paragraph","content":"

So far, we have talked about improving your accounts receivable tracking in different ways:

\n"},{"acf_fc_layout":"bullet_list","items":[{"text":"Improving your billing process by streamlining your workflows and using the right tool."},{"text":"Centralizing your data in one place,"},{"text":"

Tracking the right KPIs, the right way.

"}]},{"acf_fc_layout":"paragraph","content":"

Guess what? Upflow does all of that! And the best part is: that most of it is automated. Once set up, you can use Upflow as your one source of truth. As it connects with your existing finance tech stack, all your financial data is available in real time.

\n"},{"acf_fc_layout":"paragraph","content":"

We also offer analytics features to help you track your important KPIs metrics, like your DSO. They’re all calculated automatically, and displayed in a way that’s easy to take in quickly. You can trust the data used is top-quality, and make better decisions with it.

\n"},{"acf_fc_layout":"space_block"},{"acf_fc_layout":"heading","text":"A/R Software Goes Further.","level":"h3"},{"acf_fc_layout":"space_block"},{"acf_fc_layout":"paragraph","content":"

Yes, accounts receivable tracking is great! What’s even better is to be able to do something about it. With a tool like Upflow, you have access to your A/R KPIs and can take action on them directly.

\n"},{"acf_fc_layout":"paragraph","content":"

Notice one category of your aging report is piling up? You can see a list of your outstanding invoices and send email reminders straight away!

\n"},{"acf_fc_layout":"paragraph","content":"

The best automated A/R software helps you with your analysis, but also with your strategy and your action-taking. Having one place specially dedicated to your accounts receivable management is essential to give it the attention it needs.

\n"},{"acf_fc_layout":"space_block"},{"acf_fc_layout":"heading","text":"5. Use Your AR Tracking to Improve Your Cash Flow ","level":"h2"},{"acf_fc_layout":"space_block"},{"acf_fc_layout":"paragraph","content":"

We like to make things concrete, so you’ll find next a few examples of how better accounts receivable tracking leads to better cash flow for your company.

\n"},{"acf_fc_layout":"space_block"},{"acf_fc_layout":"heading","text":"Reducing Your DSO to Increase Your Cash Flow.","level":"h3"},{"acf_fc_layout":"space_block"},{"acf_fc_layout":"paragraph","content":"

A high DSO is a sign of long payment times, and might even indicate a bad product/market fit. It’s important to investigate the source of these longer payment times, and find the adequate solution for your business.

\n"},{"acf_fc_layout":"paragraph","content":"

Let’s say everything is doing well in terms of your business model, but you’ve noticed your customers tend to make late payments, hence your high DSO.

\n"},{"acf_fc_layout":"paragraph","content":"

Once you’ve noticed that, you can decide to change (or clarify) your credit sales policies. You can:

\n"},{"acf_fc_layout":"bullet_list","items":[{"text":"Start charging a late payment fee, "},{"text":"Incentivize early payments, "},{"text":"Add faster and simpler payment options (credit card debit vs bank transfer),"},{"text":"Talk with your sales teams and tell them to limit the credit sales to X days."},{"text":"Etc. "}]},{"acf_fc_layout":"paragraph","content":"

These will help reduce your payment times and your DSO, impacting positively your cash flow.

\n"},{"acf_fc_layout":"space_block"},{"acf_fc_layout":"heading","text":"Sending Payment Reminders to Get Paid Faster.","level":"h3"},{"acf_fc_layout":"space_block"},{"acf_fc_layout":"paragraph","content":"

Thanks to your billing cohort, you’ve just noticed a few of your last wave of invoices haven’t been paid.

\n"},{"acf_fc_layout":"paragraph","content":"

Upon seeing this, you can double check if your invoices were actually received by your clients. A technical (or human) mistake is always possible.

\n"},{"acf_fc_layout":"paragraph","content":"

After checking the software you use to send your invoices, you can follow up with your clients with a personalized email reminder. Asking to confirm reception of your invoice is always a great first step in the payment reminder process. It comes out as a genuine concern and starts the conversation.

\n"},{"acf_fc_layout":"paragraph","content":"

If you notice you have to send more than a few payment reminders, you can even take it a step further by designing a complete payment reminder strategy by:

\n"},{"acf_fc_layout":"bullet_list","items":[{"text":"Setting up a payment reminder workflow: have a clear internal process of when to send what. You can even send payment reminders before your invoice is past due! The best workflows include several follow ups (about 8-10) and mix emails with letters and phone calls. "}]},{"acf_fc_layout":"bullet_list","items":[{"text":"Tailor your workflows: personalized communications are more effective. "}]},{"acf_fc_layout":"paragraph","content":"

You could have a workflow set up for clients who frequently make late payments, which would include more emails. You could have a different one for new clients, corporate clients, etc.

\n"},{"acf_fc_layout":"bullet_list","items":[{"text":"

Use templates: writing each and every email from scratch is not the best use of your energy. It’s better to use a few trusted email templates. You can (and should) still personalize them to your clients, but most of the work is done already.

"}]},{"acf_fc_layout":"paragraph","content":"

Upflow has some ready-made templates for you, as well as a few different workflows that work to get you paid. You can even automate when these emails are sent, or leave reminders for you to send them at the right time.

\n"},{"acf_fc_layout":"hubspot_cta","id":"8df0d460-70d0-40c2-bea0-b8236477d27a","alt":"cta request a demo"},{"acf_fc_layout":"space_block"},{"acf_fc_layout":"paragraph","content":"

Key Takeaways:

\n"},{"acf_fc_layout":"bullet_list","items":[{"text":"Accounts Receivable tracking is essential to good cash flow management and to ensure your business’ steady growth. "}]},{"acf_fc_layout":"bullet_list","items":[{"text":"To improve your A/R tracking, look at improving your billing process. Streamlining your internal process and using the right billing software will make it easier for both you and your clients to get paid."}]},{"acf_fc_layout":"bullet_list","items":[{"text":"

Working in an integrated, connected ecosystem is essential when it comes to finances. A/R tracking is no exception. Centralizing your data into one place leads to faster and more accurate decision-making.

"},{"text":"Depending on your business, there are plenty of different A/R KPIs you could track. Make sure to pay attention to the ones who have the most impact on your cash flow. A dashboard is a good tool to help with your accounts receivable tracking."}]},{"acf_fc_layout":"bullet_list","items":[{"text":"Using A/R software means doing all of the above easily. As they are designed for this purpose, they make your accounts receivable tracking more accurate and efficient. "}]},{"acf_fc_layout":"bullet_list","items":[{"text":"Having a dedicated A/R software means being able to address all aspects of your A/R (tracking and taking action) in one place. "}]},{"acf_fc_layout":"bullet_list","items":[{"text":"

If your DSO is high, review your payment policies. If your past due invoices are accumulating, email payment reminders help you get paid faster.

"}]}],"primary_category":{"term_id":374,"name":"AR metrics","slug":"ar-metrics","term_group":0,"term_taxonomy_id":97,"taxonomy":"category","description":"Tracking your receivable KPIs is crucial to mesure the efficiency of your cash collection. But which metric should you track? And how can you calculate and improve them? Have a look at our dedicated articles.","parent":0,"count":27,"filter":"raw"},"related_author_id":10617,"right_sidebar_call_to_action_id":"","right_sidebar_call_to_action_alt":"","date_modified":"29/07/2026","og_image":false,"og_title":"","og_description":"","canonical_mode":"auto","x_default_mode":"auto","_taxonomies":{"category":[{"id":374,"name":"AR metrics","slug":"ar-metrics","description":"Tracking your receivable KPIs is crucial to mesure the efficiency of your cash collection. But which metric should you track? And how can you calculate and improve them? Have a look at our dedicated articles.","parent":null}],"translation_priority":[{"id":11,"name":"Optional","slug":"optional","description":"","parent":null}]}},"publishedAt":"June 5, 2023","publishedAtIso":"2023-06-05T02:00:00Z","modifiedAtIso":"$undefined"},{"title":"CFOs: What Should You Track on Your Cash Flow Dashboards?","description":"Just like a heartbeat monitor, your cash flow dashboard allows you to track the important metrics for your business. Which metrics should you track? What does a good financial dashboard look like?","image":"https://cms.upflow.dev.3codes.io/wp-content/uploads/2022/10/cashflow-dashboard.png","imageAlt":"","fields":{"link":"/blog/ar-metrics/cashflow-dashboard","_taxonomies":{"article_type":[{"id":374,"name":"AR metrics","slug":"ar-metrics","description":""}]},"author":{"name":"Alexandre Antoine","image":"https://cms.upflow.dev.3codes.io/wp-content/uploads/2026/07/9-1.png","description":"

\n","position":"Finance Director at Upflow","slug":"alex-finance-director"}},"acf":{"seo_title":"CFOs: What Should You Track on Your Cash Flow Dashboards?","seo_description":"Without cash flow, you have no business. That’s why you need to check on your company’s health, ie, it’s cash flow regularly. And what’s where cash flow dashboards come in. Which metrics should you track? What does a good financial dashboard look like?","body":[{"acf_fc_layout":"paragraph","content":"

If your company was alive, its cash flow would be its blood. Without cash flow, you have no business. That’s why you need to check on your company’s health, ie, it’s cash flow regularly. And what’s where cash flow dashboards come in.

\n"},{"acf_fc_layout":"paragraph","content":"

Just like a heartbeat monitor, your cash flow dashboard allows you to track the important metrics for your business.

\n"},{"acf_fc_layout":"paragraph","content":"

On paper, it is straightforward: you follow the KPIs you are interested in. In reality, it is more difficult and comes with a set of questions:

\n"},{"acf_fc_layout":"bullet_list","items":[{"text":"Which metrics should you track? "},{"text":"What does a good financial dashboard look like? "},{"text":"

What’s the best way to visualize, track and report your KPIs?

"}]},{"acf_fc_layout":"paragraph","content":"

You’ll find the answers to these, with examples, in the article below!

\n"},{"acf_fc_layout":"paragraph","content":"

Want to skip ahead? Upflow has a built-in cash inflow feature to help you plan your cash for the next 6 months.

\n"},{"acf_fc_layout":"hubspot_cta","id":"8df0d460-70d0-40c2-bea0-b8236477d27a","alt":"ask a demo for the cash forecast"},{"acf_fc_layout":"space_block"},{"acf_fc_layout":"paragraph","content":"

Let’s start with the cash flow metrics that should figure on your dashboard:

\n"},{"acf_fc_layout":"heading","text":"Cash Balance.","level":"h2"},{"acf_fc_layout":"space_block"},{"acf_fc_layout":"heading","text":"What is Cash Balance and Why Does it Matter?","level":"h3"},{"acf_fc_layout":"space_block"},{"acf_fc_layout":"paragraph","content":"

Your cash balance is the cash you have available at the moment. Admittedly, it is the single most important financial metric on your dashboard.

\n"},{"acf_fc_layout":"paragraph","content":"

Checking the company’s cash balance is one of the daily tasks of any financial controller. With this information, you can know accurately what can be paid, invested, used to repay debt, etc.

\n"},{"acf_fc_layout":"paragraph","content":"

Your cash balance is the pulse of your company. By having a look at it, you can gauge how well it is performing and take the necessary actions to not only survive but thrive.

\n"},{"acf_fc_layout":"space_block"},{"acf_fc_layout":"heading","text":"How Do You Calculate Your Cash Balance? ","level":"h3"},{"acf_fc_layout":"paragraph","content":"

The formula to get your cash balance is rather easy. You get it by adding your current cash to the previous opening cash balance.

\n"},{"acf_fc_layout":"paragraph","content":"

Even if your cash balance in a month is negative, it’s best to keep your overall cash balance positive. Cash forecasting can help buffer by planning for such eventuality.

\n"},{"acf_fc_layout":"space_block"},{"acf_fc_layout":"heading","text":"Cash Inflows.","level":"h2"},{"acf_fc_layout":"space_block"},{"acf_fc_layout":"heading","text":"What are Cash Inflows?","level":"h3"},{"acf_fc_layout":"paragraph","content":"

Your cash inflows are the amounts of cash that come into your business bank accounts over a period of time.

\n"},{"acf_fc_layout":"paragraph","content":"

It encompasses cash from different activities:

\n"},{"acf_fc_layout":"bullet_list","items":[{"text":"

Operating: your paid invoices, i.e. the goods and/or services cashed in this month (that amount would be on your sales dashboard, too!)

"},{"text":"Financing: your interests on loans extended.
"},{"text":"Investing: your ROI and dividends."}]},{"acf_fc_layout":"paragraph","content":"

On your cash flow dashboard, we recommend you get both a total cash inflow and a cash inflow for each of the above categories. That’ll allow you to closely monitor each part of your business and understand where your cash is coming from exactly. Always handy!

\n"},{"acf_fc_layout":"space_block"},{"acf_fc_layout":"heading","text":"How to Calculate Your Cash Inflow? ","level":"h3"},{"acf_fc_layout":"paragraph","content":"

To get your total cash inflow over a month, you simply need to add your various revenue streams together. That’s it!

\n"},{"acf_fc_layout":"paragraph","content":"

Now, as financial professionals, we like to go a step beyond and know what your cash will look like tomorrow, next month, and beyond. On Upflow, you can automatically get a cash inflow forecast for the next 6 months of your business, based on your previous collections.

\n"},{"acf_fc_layout":"paragraph","content":"

Want to try it out? Have a look at our Discover Upflow Plan.

\n"},{"acf_fc_layout":"hubspot_cta","id":"5dce7b06-14d0-4a82-a83c-2c25ba953ea2","alt":"cta analytics by upflow"},{"acf_fc_layout":"space_block"},{"acf_fc_layout":"heading","text":"Cash Outflows. ","level":"h2"},{"acf_fc_layout":"space_block"},{"acf_fc_layout":"heading","text":"What are Cash Outflows?","level":"h3"},{"acf_fc_layout":"paragraph","content":"

Your cash outflows are the opposite of your cash inflows: it’s all the cash that goes out each month.

\n"},{"acf_fc_layout":"paragraph","content":"

Once more, you can split your expenses into 3 categories:

\n"},{"acf_fc_layout":"bullet_list","items":[{"text":"Operating: paid invoices, inventories, and services purchased."},{"text":"Financing: interests on loans and debt repayment."},{"text":"Investing: any investment made during the period like buying equipment or dividends given."}]},{"acf_fc_layout":"paragraph","content":"

These appear on your cash flow statement which, unlike your income statement, shows your working capital.

\n"},{"acf_fc_layout":"space_block"},{"acf_fc_layout":"heading","text":"How to Calculate Your Cash Outflows?","level":"h3"},{"acf_fc_layout":"paragraph","content":"

If you want to calculate your cash outflows, you just have to add them together. A simple summing in theory, but we all know that it can get difficult to track all outgoings through your company. That’s why you have a financial department in the first place, after all!

\n"},{"acf_fc_layout":"paragraph","content":"

That’s why the best way to calculate your cash outflows is by using accounting software (or the accounting feature of your bank account). It automatically tracks all your expenditures across your company. Most modern ones include features that not only allow you to keep your receipts, but also help with reconciliation.

\n"},{"acf_fc_layout":"space_block"},{"acf_fc_layout":"heading","text":"Net Operating Cash Flow. ","level":"h2"},{"acf_fc_layout":"space_block"},{"acf_fc_layout":"heading","text":"What is Your Net Operating Cash Flow? ","level":"h3"},{"acf_fc_layout":"paragraph","content":"

To get to your Net Operating Cash Flow (or net OCF), let’s first have a look at your operating cash flow.

\n"},{"acf_fc_layout":"paragraph","content":"

Your OCF is your cash balance for the operating part of your business. Concretely, it is all the activities normally run by your company like selling, paying salaries, purchasing inventory, etc. It figures in the first part of your cash flow statement.

\n"},{"acf_fc_layout":"paragraph","content":"

It’s a great metric to see if your cash flow generation is sufficient to run your business. Because it focuses on your business operations only, it gives you an accurate picture of where you are standing, well, business-wise.

\n"},{"acf_fc_layout":"paragraph","content":"

If you want to know if your company is successful at what it does: look at your operating cash flow. It tells you how well you are performing and as such, is an indicator of stability – or not.

\n"},{"acf_fc_layout":"space_block"},{"acf_fc_layout":"heading","text":"How to Calculate Your Net Operating Cash Flow? ","level":"h3"},{"acf_fc_layout":"paragraph","content":"

Your operating cash flow is based on your cash inflows and outflows. Under GAAP, you have two ways to calculate it: direct and indirect methods.

\n"},{"acf_fc_layout":"paragraph","content":"

The direct method is cash-based. You simply calculate your cash inflows and outflows over the time period. You add in your revenues and take off your expenses. Easy.

\n"},{"acf_fc_layout":"paragraph","content":"

The indirect method is cash-based too but reverted back from accrual accounting. Because accrual accounting is easier to use for big or growing businesses, it is often used. But it is not accurate when it comes to depicting your available cash, as records when transactions are registered and not when the cash changes hands.

\n"},{"acf_fc_layout":"paragraph","content":"

To get to your operating cash flow, you, therefore, need to get all the accounting “fluff” out of your financial statements.

\n"},{"acf_fc_layout":"paragraph","content":"

Taking your Net Income as a basis, add back your non-cash accounts (like depreciation). Consider also your changes in non-working capital accounts (like your accounts receivable)

\n"},{"acf_fc_layout":"color_block","content":"

Operating Cash Flow = Operating Income + Depreciation – Taxes + Change in Working Capital.

\n"},{"acf_fc_layout":"paragraph","content":"

That’ll give you your gross operating cash flow. To get to your net operating cash flow, you then need to subtract your loan interests and taxes from your total.

\n"},{"acf_fc_layout":"paragraph","content":"

We recommend tracking your net OCF as it gives you a better representation of the cash available. Taxes and loan interests need to be paid anyway, so it’s money you only temporarily have.

\n"},{"acf_fc_layout":"space_block"},{"acf_fc_layout":"heading","text":"Accounts Receivable. ","level":"h2"},{"acf_fc_layout":"space_block"},{"acf_fc_layout":"heading","text":"Why are Accounts Receivable Important for your Cash Flow? ","level":"h3"},{"acf_fc_layout":"paragraph","content":"

Your accounts receivable are the invoices yet to be paid by your clients. The ones you have issued but for which payment hasn’t been collected.

\n"},{"acf_fc_layout":"paragraph","content":"

It’s good to keep in mind that your A/R is basically a loan you extend to your clients. It’s money they haven’t paid yet for a product/service they have benefited from. As such, it heavily influences your cash flow.

\n"},{"acf_fc_layout":"paragraph","content":"

Since the money hasn’t landed on your bank account yet, it is considered a liability on your balance sheet. Your clients could raise a dispute over their invoices, or simply never pay you.

\n"},{"acf_fc_layout":"paragraph","content":"

Of course, there are many ways you can prevent bad debt from happening – one of them is to encourage your clients to sign up to a subscription with their credit card.

\n"},{"acf_fc_layout":"paragraph","content":"

If you don’t cash in enough of your accounts receivable, it could jeopardize your liquidity. This is why you need to pay attention to several A/R metrics. Having an AR dashboard is crucial for your growth.

\n"},{"acf_fc_layout":"paragraph","content":"

Are you having trouble keeping tabs on your AR and getting paid late? Have a look at our free guide with tips to get paid on time!

\n"},{"acf_fc_layout":"space_block"},{"acf_fc_layout":"hubspot_cta","id":"60129848-c9b6-4924-9af4-9f5af5bcc8e1","alt":"download white paper"},{"acf_fc_layout":"space_block"},{"acf_fc_layout":"heading","text":"How to Track Your Accounts Receivable?","level":"h3"},{"acf_fc_layout":"paragraph","content":"

Tracking your A/R means tracking your invoices and making sure they’re paid. On-time.

\n"},{"acf_fc_layout":"paragraph","content":"

To do so, you can use spreadsheets (which we don’t recommend), or you can use specialized A/R software (like us!). Your billing or accounting software might offer a dashboard feature, too, with some A/R features.

\n"},{"acf_fc_layout":"paragraph","content":"

What’s important is to have both:

\n"},{"acf_fc_layout":"bullet_list","items":[{"text":"An overview of your unpaid invoices: the total amount of your A/R."}]},{"acf_fc_layout":"bullet_list","items":[{"text":"The details of your A/R breakdown with each invoice, amount, due date, and client contact. "}]},{"acf_fc_layout":"paragraph","content":"

The former should figure on your cash flow dashboard, while the latter will help you to take action to actually collect your payments.

\n"},{"acf_fc_layout":"paragraph","content":"

Besides the total amount pending, you also want to look at a couple of more A/R metrics:

\n"},{"acf_fc_layout":"bullet_list","items":[{"text":"Your Days Sales Outstanding (DSO): it is the number of days your clients take to pay you, on average. "}]},{"acf_fc_layout":"paragraph","content":"

This number should be as close to your payment terms as possible (0 days if you require payment upon receipt, 30 days if you have a one-month due date, etc.)

\n"},{"acf_fc_layout":"paragraph","content":"

Along with your cash flow, it is a great indicator of your liquidity and should therefore be kept quite low. If it’s higher than you’d like, there is a way to improve both your DSO and your Cash Flow.

\n"},{"acf_fc_layout":"bullet_list","items":[{"text":"Your Aging Report: it is a visual representation of your unpaid invoices in different categories: 0 to 30 days overdue, 30 to 60 days, etc. At a glance, you get an idea of which invoices should be made a priority. "}]},{"acf_fc_layout":"paragraph","content":"

These are just two AR metrics. There are more KPIs your fast-growing company should track to optimize cash collection

\n"},{"acf_fc_layout":"paragraph","content":"

Need help tracking these A/R metrics? Have a look at our free spreadsheet.

\n"},{"acf_fc_layout":"hubspot_cta","id":"45d64f0e-66b1-4cea-8d72-f2fec1726ceb","alt":"cta free spreadsheet"},{"acf_fc_layout":"space_block"},{"acf_fc_layout":"heading","text":"Accounts Payable.","level":"h2"},{"acf_fc_layout":"space_block"},{"acf_fc_layout":"heading","text":"What Are Accounts Payables?","level":"h3"},{"acf_fc_layout":"paragraph","content":"

Your Accounts Payable (AP) are essentially the opposite of your Accounts Receivable. They are the money you owe to your providers for services/products they have delivered.

\n"},{"acf_fc_layout":"paragraph","content":"

When you receive an invoice and process it but don’t pay it straight away, it becomes an AP. Instead of paying cash, you are being extended a credit by the vendor company.

\n"},{"acf_fc_layout":"paragraph","content":"

So they’re not cash outflows yet but will be in the future. It’s crucial to monitor them to make sure you have the necessary liquidity to pay them on time.

\n"},{"acf_fc_layout":"paragraph","content":"

What you track on cash flow dashboards is the total amount due.

\n"},{"acf_fc_layout":"paragraph","content":"

If you want to get more details to optimize your payable process, you can look at:

\n"},{"acf_fc_layout":"bullet_list","items":[{"text":"Your Days Payable Outstanding: it’s the average number of days it takes you to pay your providers. It’s like your DSO but applied to your AP."}]},{"acf_fc_layout":"bullet_list","items":[{"text":"Your invoicing cycle: how long it takes for your finance team to process an invoice."}]},{"acf_fc_layout":"bullet_list","items":[{"text":"Your average cost per invoice: how much it costs to process an invoice."}]},{"acf_fc_layout":"paragraph","content":"

It’s usually better to use software to process and track your payables, as it is both cheaper and more efficient.

\n"},{"acf_fc_layout":"space_block"},{"acf_fc_layout":"heading","text":"Why Pay Close Attention to Your Accounts Payable? ","level":"h3"},{"acf_fc_layout":"paragraph","content":"

Accounts payable are your short-time debts. And like every debt, it’s good to know exactly how much you owe, and when. Which is why it’s unmissable on your cash flow dashboard.

\n"},{"acf_fc_layout":"paragraph","content":"

Because it is an indicator of expenses and future cash outflows, it is important to track your AP:

\n"},{"acf_fc_layout":"bullet_list","items":[{"text":"If you see them piling up, you know you’ll need some liquidity soon to pay them off."},{"text":"If they are close to zero, your cash flow may benefit from paying your providers later.
"}]},{"acf_fc_layout":"paragraph","content":"

There is a balance to find between keeping your liquidity high while meeting your providers’ payment terms. Watch out for late payers fees, but also for early payment discounts!

\n"},{"acf_fc_layout":"space_block"},{"acf_fc_layout":"heading","text":"Burn Rate. ","level":"h2"},{"acf_fc_layout":"space_block"},{"acf_fc_layout":"heading","text":"What is Your Burn Rate and Why Does it Matter? ","level":"h3"},{"acf_fc_layout":"paragraph","content":"

Your burn rate is the speed at which you burn through your cash before you generate a positive cash flow.

\n"},{"acf_fc_layout":"paragraph","content":"

It’s especially used by new companies like startups, who rely on external funding (like VCs). It is important to know how fast you burn your cash, and how long you have before you run out of it.

\n"},{"acf_fc_layout":"space_block"},{"acf_fc_layout":"heading","text":"How Do You Calculate Your Burn Rate?","level":"h3"},{"acf_fc_layout":"paragraph","content":"

To calculate your cash burn rate, you need to know your current cash position and your monthly operating expenses.

\n"},{"acf_fc_layout":"color_block","content":"

Gross Burn Rate = Cash / Monthly Operating Costs

\n"},{"acf_fc_layout":"paragraph","content":"

If you are already bringing in money from your core activities, you can also calculate your net burn rate. This is more accurate as it factors in the cash from your operations.

\n"},{"acf_fc_layout":"color_block","content":"

Net Burn Rate = Cash / Monthly Operating Losses

\n"},{"acf_fc_layout":"space_block"},{"acf_fc_layout":"heading","text":"Cash Runway.","level":"h2"},{"acf_fc_layout":"space_block"},{"acf_fc_layout":"heading","text":"What is Cash Runway and Why Track it?","level":"h3"},{"acf_fc_layout":"paragraph","content":"

Your cash runway measures how long your company can remain solvent. It answers the question: how long do we have before you run out of cash?

\n"},{"acf_fc_layout":"paragraph","content":"

Startups use it and it is a metric investors want to see. Startups tend to have a faster burn rate and therefore a smaller cash runway.

\n"},{"acf_fc_layout":"paragraph","content":"

Bigger and more established companies use it as a key performance indicator too, to report to boards and management alike.

\n"},{"acf_fc_layout":"paragraph","content":"

All in all, your cash runway is an indicator of your profitability. Tracking it means knowing where you stand and being able to course-correct in time. If it is shorter than you’d like, you can watch your spending.

\n"},{"acf_fc_layout":"paragraph","content":"

It’s important to factor in the seasonality of your business, too. If your company sells ice creams, it might have a short runway in winter. On the other hand, it will get longer in the summer months.

\n"},{"acf_fc_layout":"paragraph","content":"

Monitoring your cash runway means knowing what is normal for your company and what is not, so you can take the necessary actions.

\n"},{"acf_fc_layout":"space_block"},{"acf_fc_layout":"heading","text":"How to Calculate your Cash Runway? ","level":"h3"},{"acf_fc_layout":"paragraph","content":"

To calculate your cash runway, you need to first get your cash burn rate, i.e. the speed at which you go through your cash.

\n"},{"acf_fc_layout":"color_block","content":"

Cash runway = Total Cash / Burn rate

\n"},{"acf_fc_layout":"paragraph","content":"

That will give you the amount of time you have before you run out of cash. So if you have $2,000,000 on your bank accounts and spend $200,000 a month, your cash runway is 10 months

\n"},{"acf_fc_layout":"heading","text":"Cash Flow Dashboard Example.","level":"h2"},{"acf_fc_layout":"paragraph","content":"

Let’s take an example of a cash flow dashboard. Super-Profitable Company (SPC) is in its 3rd year of business.

\n"},{"acf_fc_layout":"paragraph","content":"

Here are its (simplified) financial numbers for September:

\n"},{"acf_fc_layout":"color_block","content":"

Opening cash balance: $1,300,000 Closing cash balance: $1,700,000 Sales: $800,000Tax credits: $75,000Salaries: $220,000 CoGS: $110,000 IT purchase: $30,000Interests on loans: $25,000Taxes: $90,000Depreciation: $40,000Accounts Payable: $80,000Accounts Receivable: $250,000

\n"},{"acf_fc_layout":"space_block"},{"acf_fc_layout":"heading","text":"Cash Flow Dashboard Template.","level":"h3"},{"acf_fc_layout":"paragraph","content":"

Now, let’s calculate some of the metrics that would appear on SPC’s financial dashboard.

\n"},{"acf_fc_layout":"heading","text":"Cash Inflow: ","level":"h4"},{"acf_fc_layout":"color_block","content":"

From Operating = $800,000From Financing = $75,000
\nTotal Cash Inflow for September = $875,000

\n"},{"acf_fc_layout":"space_block"},{"acf_fc_layout":"heading","text":"Cash Outflow: ","level":"h4"},{"acf_fc_layout":"color_block","content":"

From Operating = $420,000From Financing = $25,000From Investing = $30,000Total Cash Outflow for September = $475,000

\n"},{"acf_fc_layout":"space_block"},{"acf_fc_layout":"heading","text":"Cash Balance: ","level":"h4"},{"acf_fc_layout":"color_block","content":"

The formula is: Cash Balance = Closing balance – Opening balance
\nOpening Cash Balance: $1,300,000Closing Cash Balance: $1,700,000
\nChange in cash Balance for September = $400,000.

\n"},{"acf_fc_layout":"space_block"},{"acf_fc_layout":"heading","text":"Net Operating Cash Flow: ","level":"h4"},{"acf_fc_layout":"color_block","content":"

The formula for Net Operating Cash Flow is: Operating Income + Depreciation – Taxes + Change in Working Capital (AP AR).
\nNet Operating Cash Flow = $800,000 operating income + $50,000 depreciation + $80,000 accounts payable – $300,000 accounts receivable – $90,000 taxes = $630,000.

\n"},{"acf_fc_layout":"space_block"},{"acf_fc_layout":"heading","text":"Accounts Receivable and DSO:","level":"h4"},{"acf_fc_layout":"paragraph","content":"

The total of Accounts Receivable over September is $300,000. Let’s also calculate the Days Sales Outstanding.

\n"},{"acf_fc_layout":"color_block","content":"

DSO = Accounts Receivable end of period / Gross Sales * number of days in period
\nHere, DSO = $300,000 / $800,000 * 30 days = 11,25 days

\n"},{"acf_fc_layout":"paragraph","content":"

It takes 11 days on average for Super Profitable Company to be paid.

\n"},{"acf_fc_layout":"paragraph","content":"

Note that for the sake of simplicity here, that’s done using the quick simple method – which isn’t the most accurate. It’s better to use the countback method. Here’s a step-by-step guide to calculating Days Sales Outstanding

\n"},{"acf_fc_layout":"space_block"},{"acf_fc_layout":"heading","text":"Accounts Receivable and Days Payable Outstanding:","level":"h4"},{"acf_fc_layout":"paragraph","content":"

The total amount of Accounts Payable in September is $80,000. Let’s also look into SPC’s Day Payable Outstanding (DPO).

\n"},{"acf_fc_layout":"color_block","content":"

DPO = Accounts Payable * Number of days / CoGSDPO = $80,000 * 30 / $110,000 = 21,8

\n"},{"acf_fc_layout":"paragraph","content":"

That means it takes about 22 days for Super Profitable Company to pay its suppliers.

\n"},{"acf_fc_layout":"paragraph","content":"

That’s a very simplified cash flow dashboard template! And it already takes a lot of time to manually track and compute these financial metrics by hand.

\n"},{"acf_fc_layout":"space_block"},{"acf_fc_layout":"heading","text":"How to Best Track Your KPIs on Your Financial Dashboard.","level":"h2"},{"acf_fc_layout":"space_block"},{"acf_fc_layout":"heading","text":"Why Excel Isn’t Enough for Calculating KPIs.","level":"h3"},{"acf_fc_layout":"paragraph","content":"

While Excel is a part of every finance team’s toolbox, it falls short when it comes to calculating KPIs.

\n"},{"acf_fc_layout":"bullet_list","items":[{"text":"It is error-prone. Putting data manually into a spreadsheet irremediably means typos and mistakes will be happening. "}]},{"acf_fc_layout":"paragraph","content":"

Then comes the question of which data to choose? If you want accurate results, you need up-to-date numbers. Those are usually spread out in between your bank accounts, billing software, sales software, accounting software, CRM… Getting the latest data quickly becomes a chase between different tools.

\n"},{"acf_fc_layout":"bullet_list","items":[{"text":"It’s inefficient. Calculating your financial KPIs by hand takes a lot of time. Even with an Excel template, it requires a lot of tweaking to get the results you want. Double that time if you want to change a variable, run different scenarios, or compare time periods. "}]},{"acf_fc_layout":"paragraph","content":"

The time you spend on manually chasing, calculating, and tracking is time you don’t spend on something else. Like actually improving your KPIs.

\n"},{"acf_fc_layout":"paragraph","content":"

Even if you have a finance team to work with, their energy would be best dedicated to tasks like setting up late payment reminders to collect your A/R.

\n"},{"acf_fc_layout":"paragraph","content":"

(Plus, let’s be honest: Microsoft doesn’t offer the best customer experience!)

\n"},{"acf_fc_layout":"paragraph","content":"

So, if Excel dashboards aren’t accurate or efficient, what’s the alternative?

\n"},{"acf_fc_layout":"space_block"},{"acf_fc_layout":"heading","text":"KPI Dashboard Made Easy with Automation. ","level":"h3"},{"acf_fc_layout":"paragraph","content":"

What you want is automated software that does all the computing, tracking, synchronizing, and reporting for you.

\n"},{"acf_fc_layout":"paragraph","content":"

Financial software is designed for this purpose. Using one has multiple benefits:

\n"},{"acf_fc_layout":"bullet_list","items":[{"text":"Effective tracking of your KPIs: you don’t have to compromise time for quality. If you use software like Upflow, you know that your DSO will be calculated in the most accurate way. You don’t have to even worry about it. You can focus on checking your metrics regularly to course-correct your strategy. "}]},{"acf_fc_layout":"bullet_list","items":[{"text":"Accurate data in real-time: once your software is integrated with your account and billing apps, you know the data you get is in real-time. Your software becomes your one source of truth when it comes to your cash flow. "}]},{"acf_fc_layout":"paragraph","content":"

You can easily access visualizations of your data and even create reports. Perfect for last-minute meetings!

\n"},{"acf_fc_layout":"bullet_list","items":[{"text":"

Cash flow forecast: one of the key features of specialized software is prediction. You get forecasts based on your previous data, so you know what’s coming.

"}]},{"acf_fc_layout":"paragraph","content":"

Our in-house tool for instance bases itself on your previous collection speed to predict your cash inflow for the next 6 months.

\n"},{"acf_fc_layout":"space_block"},{"acf_fc_layout":"heading","text":"Which Software to Use for Financial Dashboards?","level":"h3"},{"acf_fc_layout":"paragraph","content":"

You can choose to go with software that does only financial dashboards (like Biz Infograph). Or, you can choose one with advanced analytics that also allows you to improve your cash flow.

\n"},{"acf_fc_layout":"paragraph","content":"

When it comes to adding software to your company, there are a couple of things to pay attention to

\n"},{"acf_fc_layout":"bullet_list","items":[{"text":"Integration: your new software must integrate within your existing finance stack. If not, you’ll have to transfer data manually which defeats the point of even automating your tasks. Make sure your software has a strong API and connects with third-party apps via an API gateway platform or API integration services.
"},{"text":"

Features: when it comes to cash flow dashboards, what are your exact needs? Mapping them out will bring extra clarity. That’ll help define if you can meet your needs with an analytics feature of existing software, or if you need a dedicated tool to get more depth.

"},{"text":"Think long-term: tomorrow’s needs will be different from today’s. That’s why you should think ahead when it comes to your finance stack. Maybe you can cope with a reduced scope right now. But it might be time to prepare for the future today, while the urgency isn’t too strong. "}]},{"acf_fc_layout":"paragraph","content":"

At Upflow, we also think the best software is the one that allows you not only to track your metrics but to optimize them too.

\n"},{"acf_fc_layout":"image","image":"https://cms.upflow.dev.3codes.io/wp-content/uploads/2022/10/square.png","caption":""},{"acf_fc_layout":"paragraph","content":"

This is why our A/R software offers analytics features like a cash forecast while allowing you to get paid faster. All in one place.

\n"},{"acf_fc_layout":"paragraph","content":"

Key Takeaways

\n"},{"acf_fc_layout":"paragraph","content":""},{"acf_fc_layout":"bullet_list","items":[{"text":"

Cash flow dashboards help you track your cash position and assist you in cash analysis.

"},{"text":"

These are the 8 financials KPIs we suggest you get on your financial dashboard:

Cash Balance,
Cash Inflow,
Cash Outflow,
Net Operating Cash Flow,
Accounts Receivable (with DSO),
Accounts Payable (with DPO),
Burn Rate,
Cash Runway.

"},{"text":"While tempting, using excel dashboards is time-consuming as well as inaccurate. "}]},{"acf_fc_layout":"bullet_list","items":[{"text":"To track, visualize and report your KPIs, it’s best to use automated software that plugs into your existing finance stack. "}]},{"acf_fc_layout":"bullet_list","items":[{"text":"Consider what your present and future needs are before picking software as switching costs are high. "}]},{"acf_fc_layout":"bullet_list","items":[{"text":"

Upflow is an A/R automated software that gets you paid faster while offering in-depth analytics to help financial management.

"}]}],"primary_category":{"term_id":374,"name":"AR metrics","slug":"ar-metrics","term_group":0,"term_taxonomy_id":97,"taxonomy":"category","description":"Tracking your receivable KPIs is crucial to mesure the efficiency of your cash collection. But which metric should you track? And how can you calculate and improve them? Have a look at our dedicated articles.","parent":0,"count":27,"filter":"raw"},"right_sidebar_call_to_action_id":"fa9d10f7-dd76-4797-9f51-15d35b9b6cfe","right_sidebar_call_to_action_alt":"cta webinar approval max","related_author_id":10617,"date_modified":"29/07/2026","og_image":false,"og_title":"","og_description":"","canonical_mode":"auto","x_default_mode":"auto","_taxonomies":{"category":[{"id":374,"name":"AR metrics","slug":"ar-metrics","description":"Tracking your receivable KPIs is crucial to mesure the efficiency of your cash collection. But which metric should you track? And how can you calculate and improve them? Have a look at our dedicated articles.","parent":null}],"translation_priority":[{"id":11,"name":"Optional","slug":"optional","description":"","parent":null}]}},"publishedAt":"October 13, 2022","publishedAtIso":"2022-10-13T02:00:00Z","modifiedAtIso":"$undefined"},{"title":"CFO, CEO: Why and how to track your DSO","description":"Understand what is your DSO and learn how to calculate it","image":"https://cms.upflow.dev.3codes.io/wp-content/uploads/2022/08/cfo-ceo-why-you-should-track-your-dso-and-how-to.png","imageAlt":"","fields":{"link":"/blog/reduce-dso/cfo-ceo-why-you-should-track-your-dso-and-how-to","_taxonomies":{"article_type":[{"id":374,"name":"AR metrics","slug":"ar-metrics","description":""}]},"author":{"name":"Alex Louisy","image":"https://cms.upflow.dev.3codes.io/wp-content/uploads/2026/07/7.png","description":"$62","position":"Co-founder and CEO of Upflow","slug":"alexandre"}},"acf":{"seo_title":"CFO, CEO, why you should track your DSO, and how to measure it","seo_description":"Days Sales Outstanding (DSO) indicates how long it takes your business to get paid by customers. Read on to discover more and learn how to calculate DSO.","body":[{"acf_fc_layout":"paragraph","content":"

We often hear that the top-performing companies manage their working capital efficiently, and have strong control over their cash flows. But what does this actually mean?

\n"},{"acf_fc_layout":"paragraph","content":"

From a financial perspective, simply put, businesses have both cash inflows and cash outflows. At an operational level, your business needs to ensure that you’re keeping your company’s accounts above the floating line, i.e. cash collection for customers covers your cash outflow to suppliers.

\n"},{"acf_fc_layout":"paragraph","content":"

Ideally, you not only stay above the floating line but optimize these cash flows, and collect cash faster than spending it!

\n"},{"acf_fc_layout":"paragraph","content":"

Today, we’ll focus on a key item of cash inflows: measuring how your business gets paid by customers.

\n"},{"acf_fc_layout":"paragraph","content":"

Read on to learn more about ;

\n"},{"acf_fc_layout":"paragraph","content":"

1/ what is DSO

\n"},{"acf_fc_layout":"paragraph","content":"

2/ why it’s important for your business and

\n"},{"acf_fc_layout":"paragraph","content":"

3/ how to measure your DSO.

\n"},{"acf_fc_layout":"paragraph","content":"

Check out our free spreadsheet to calculate, interpret and improve your DSO!

\n"},{"acf_fc_layout":"space_block"},{"acf_fc_layout":"hubspot_cta","id":"3f44d79a-b614-418a-811b-1384592bac47","alt":"dso spreadsheet"},{"acf_fc_layout":"space_block"},{"acf_fc_layout":"heading","text":"What is DSO?","level":"h2"},{"acf_fc_layout":"paragraph","content":"

What does DSO stand for? “Days Sales Outstanding”. Alongside Days Payable Outstanding and Days Inventory Outstanding, DSO is a key metric in the Cash Conversion Cycle. In simple words, it’s the time it takes your business to get paid for credit sales by your customers. It’s usually measured in a number of days.

\n"},{"acf_fc_layout":"paragraph","content":"

DSO is the average number of days between 1/ invoice issuance, and 2/ payment received. For online businesses and companies with high levels of cash sales, that’s usually 0 days, as you’re invoiced immediately when you pay. Easy. For B2B businesses issuing invoices “net 30” to Customers, in an ideal world, this number should be 30 days. Simple right?

\n"},{"acf_fc_layout":"paragraph","content":"

Well… that’s the theory. The reality is that a lot of businesses still struggle to get paid on time by Customers and their DSO is way higher than their payment terms. According to Atradius, nearly 50% of B2B invoices in the US are paid late, creating significant cash flow problems for suppliers.

\n"},{"acf_fc_layout":"heading","text":"What does your DSO number mean and why is it important?","level":"h2"},{"acf_fc_layout":"paragraph","content":"

Your DSO is an indication of how long it takes your company to get paid. You should think of your DSO in relation to your average payment terms:

\n"},{"acf_fc_layout":"bullet_list","items":[{"text":"High DSO: To ensure your business is running efficiently it's important to collect outstanding account receivables as quickly as possible. If your DSO is too high, it means that your business takes too much time to collect cash from your Customers. You are basically offering a loan to them on money that should be in your bank account! In the meantime, you may need to pay your suppliers and use your own treasury to cover the finance gaps, in particular, if you’re growing. On top of financing them, you also bear the risk of payment failures, as overdue invoices are much more likely to never get paid…. Don’t get there. Take action to lower DSO as soon as possible."},{"text":"Low DSO: If your DSO is approximately equal to that contained in your payment terms, it means your business is collecting cash efficiently from your customers. Customers pay on time when they’re happy about the service you deliver. Businesses with a low DSO often have a strict credit policy and reward customers for upfront or early payment. Having a low DSO will also please investors as it’s a fundamental indicator of liquidity. You’re in a position to pay your suppliers on time and grow your business in a healthy way. That’s great, keep it this way!"}]},{"acf_fc_layout":"paragraph","content":"

DSO is a key performance indicator for your finance team as it will give you a good sense of how efficient your business is at collecting cash over a certain period of time. This is usually a good proxy for the quality of your relationship with your Customers. It will also help you with your financial planning, as it will give you a more realistic estimate of your future cash collection. Decreasing DSO can help to boost profitability.

\n"},{"acf_fc_layout":"heading","text":"Reasons why businesses don't get paid on time","level":"h2"},{"acf_fc_layout":"paragraph","content":"

Business owners often complain about late-paying customers. But why does that happen?

\n"},{"acf_fc_layout":"paragraph","content":"

There are many reasons. Remember that when your Customer receives your invoice, it’s not a guarantee that you will get paid.

\n"},{"acf_fc_layout":"paragraph","content":"

Here are a few reasons for late payments:

\n"},{"acf_fc_layout":"bullet_list","items":[{"text":"Customers may need to go through complex approval workflows before processing a payment;"},{"text":"Customers may just simply forget about their supplier invoices when it's lost between 100 other emails. More generally, companies usually don't have the right tools to manage their outstanding invoices and receivable process ;"},{"text":"The invoice might be sent to the wrong person or lacks some data required to proceed to payment (such as a PO number);"},{"text":"Customers may dispute the invoice based on goods or services not being delivered as they were expecting and requiring a credit note or a rebate;"},{"text":"Inefficient payment processing tools and outdated payment methods may create additional complexities or delays. Wire transfers may take a few days to appear on your bank account, and checks can be lost in the mail."}]},{"acf_fc_layout":"paragraph","content":"

And the problem is, quite often, that Customers do not proactively reach out to their suppliers when such a problem occurs. That’s why B2B merchants need to be proactive about tracking unpaid invoices if they don’t want to end up with late payments, and cash flow issues. In that respect, DSO is the most synthetic indicator of the efficiency of a company’s cash collection process.

\n"},{"acf_fc_layout":"paragraph","content":"

But before trying to improve it, the first basic step is to measure your DSO. Here is how.

\n"},{"acf_fc_layout":"heading","text":"How to calculate your DSO?","level":"h2"},{"acf_fc_layout":"paragraph","content":"

As a CFO or CEO in charge of your business finances, tracking your DSO should be a top priority. Again, that’s on average the number of days between invoice issuance and payment.

\n"},{"acf_fc_layout":"paragraph","content":"

To calculate the DSO you’ll probably need to gather information from an aged accounts receivable report or your balance sheet.

\n"},{"acf_fc_layout":"paragraph","content":"

But it can get tricky:

\n"},{"acf_fc_layout":"bullet_list","items":[{"text":"It should be weighed against the value of the invoices (you probably wouldn’t care as much as about a small invoice being paid late as a really large one)"},{"text":"If you have a seasonal business with peaks of invoicing, you should account for the fact that you’re likely to have more temporarily unpaid invoices."},{"text":"At any given time, you should allow for “opened” invoices, which are invoices you’ve issued but not yet collected. It may seem obvious but if invoices are already overdue, they will be paid late or possibly even never get paid, so you should definitely account for them when reporting your DSO. Let’s examine two methods of calculating your DSO."},{"text":"1/ A simple method for calculating DSO"}]},{"acf_fc_layout":"paragraph","content":"

Here’s a back of the envelope method for calculating your DSO. Very simple!

\n"},{"acf_fc_layout":"bullet_list","items":[{"text":"Let’s say your business is making $1,200,00 net annual turnover. That’s $100,000 every month."},{"text":"And now let’s assume that at the end of the year, you have $200,000 in unpaid invoices in your ledger. That’s your “accounts receivable” at year-end."}]},{"acf_fc_layout":"paragraph","content":"

Intuitively, you can see that 2 months worth of turnover which equates to approx 60 days has not yet been received by the company.

\n"},{"acf_fc_layout":"paragraph","content":"

The simple formula is:

\n"},{"acf_fc_layout":"paragraph","content":"

(Accounts Receivables at the end of the period) / (Gross revenues over the period) * (Number of days in the period)

\n"},{"acf_fc_layout":"paragraph","content":"

In our previous example that would be ($200,000)/($1,200,000)*(365)=61 days

\n"},{"acf_fc_layout":"paragraph","content":"

Advantages:

\n"},{"acf_fc_layout":"bullet_list","items":[{"text":"It’s very easy to compute"},{"text":"You can use this formula to get a quick overview of your DSO, or any company with public accounts. (Tip: check your competitors!)"}]},{"acf_fc_layout":"paragraph","content":"

Disadvantages:

\n"},{"acf_fc_layout":"bullet_list","items":[{"text":"The formula depends on the time window you use for the calculation. If you have a seasonal business, calculating the DSO across different periods of time (3, 6, 12 months) would give you different numbers and results that are difficult to analyse."}]},{"acf_fc_layout":"space_block"},{"acf_fc_layout":"hubspot_cta","id":"3f44d79a-b614-418a-811b-1384592bac47","alt":"CTA"},{"acf_fc_layout":"space_block"},{"acf_fc_layout":"heading","text":"2/ The countback method for calculating DSO","level":"h3"},{"acf_fc_layout":"paragraph","content":"

The countback method is more accurate, and it’s widely used by finance professionals. But unfortunately, it does not use a ready-made formula like the previous one.

\n"},{"acf_fc_layout":"paragraph","content":"

The idea of the countback method is moving backwards in time, by subtracting the revenues posted each month against the initial stock of accounts receivables you have, until there’s no more left. Same idea as the previous method, but more granular. It’s also known as absorbing the sales balance. Let’s look into an example.

\n"},{"acf_fc_layout":"paragraph","content":"

Let’s assume we’re on 30 November 30th 2020 and we’d like to calculate our DSO.

\n"},{"acf_fc_layout":"paragraph","content":"

We have $2,500 of unpaid invoices (receivables) on that day and the monthly revenues for the previous month were as reported in the table below:

\n"},{"acf_fc_layout":"table_block","paste_table":"","caption":"","is_first_column_header":false,"header_cells":[{"content":"Revenues for the month","align":"left","colspan":"1"},{"content":"Total turnover for the period","align":"left","colspan":"1"}],"rows":[{"cells":[{"content":"Dec 2020","align":"left","colspan":"1"},{"content":"n/a","align":"left","colspan":"1"}]},{"cells":[{"content":"Nov 2020","align":"left","colspan":"1"},{"content":"$$1200","align":"left","colspan":"1"}]},{"cells":[{"content":"Oct 2020","align":"left","colspan":"1"},{"content":"$$800","align":"left","colspan":"1"}]},{"cells":[{"content":"Sept 2020","align":"left","colspan":"1"},{"content":"$$700","align":"left","colspan":"1"}]},{"cells":[{"content":"August 2020","align":"left","colspan":"1"},{"content":"$$900","align":"left","colspan":"1"}]}],"style":false},{"acf_fc_layout":"bullet_list","items":[{"text":"Step 1: As of November 30, the amount outstanding was $2,500. Because we have more receivables ($2500) than turnover ($1200) for November, we start by subtracting $1,200 recorded in revenues for the month. We move back to 31st of October with: - A stock of “counted back” receivables decreasing to $2,500 - $1,200 = $1,300. + 30 days DSO contribution (the whole month of November)"},{"text":"Step 2: We’re back on 31 October. There’s still more receivables ($1,300) than revenues for the month ($800). Same process as before. We move back to September 30 with - A stock of receivables decreasing to $1,300 - $800 = $500 + 31 days DSO contribution (the whole month of October)"},{"text":"Step 3: We’re back on 30 September. This time, the revenues for the month ($700) are higher than the remaining stock of receivables ($500). - Here, we’ll contribute the pro rata of DSO (500/700) * 30 = 21.4 days - There’s no more stock of receivables, we’ve gone through the end of the countback process."}]},{"acf_fc_layout":"paragraph","content":"

In total, the DSO would then be 30 days + 31 days + 21.4 days = 82.4 days

\n"},{"acf_fc_layout":"paragraph","content":"

Here is the table summarising the steps:

\n"},{"acf_fc_layout":"table_block","paste_table":"","caption":"","is_first_column_header":false,"header_cells":[{"content":"Month","align":"left","colspan":"1"},{"content":"Total gross revenues for the period","align":"left","colspan":"1"},{"content":"Remainder of accounts receivable counted back at the end of the period","align":"left","colspan":"1"},{"content":"DSO Contribution","align":"left","colspan":"1"}],"rows":[{"cells":[{"content":"Dec 2020","align":"left","colspan":"1"},{"content":"n/a","align":"left","colspan":"1"},{"content":"n/a","align":"left","colspan":"1"},{"content":"","align":"left","colspan":"1"}]},{"cells":[{"content":"Nov 2020","align":"left","colspan":"1"},{"content":"$$1200","align":"left","colspan":"1"},{"content":"$$2500","align":"left","colspan":"1"},{"content":"30.0","align":"left","colspan":"1"}]},{"cells":[{"content":"Oct 2020","align":"left","colspan":"1"},{"content":"$$800","align":"left","colspan":"1"},{"content":"$$1300","align":"left","colspan":"1"},{"content":"31.0","align":"left","colspan":"1"}]},{"cells":[{"content":"Sept 2020","align":"left","colspan":"1"},{"content":"$$700","align":"left","colspan":"1"},{"content":"$$500","align":"left","colspan":"1"},{"content":"21.4","align":"left","colspan":"1"}]},{"cells":[{"content":"August 2020","align":"left","colspan":"1"},{"content":"$$900","align":"left","colspan":"1"},{"content":"0","align":"left","colspan":"1"},{"content":"0.0","align":"left","colspan":"1"}]}],"style":false},{"acf_fc_layout":"paragraph","content":"

Advantages:

\n"},{"acf_fc_layout":"bullet_list","items":[{"text":"If your business is growing, sales’ seasonality is taken into account with this method;"},{"text":"You can calculate your DSO at any given time, without having to wait for the end of the month. It’s better if you’re tracking your DSO and your cash collection on a daily basis."}]},{"acf_fc_layout":"paragraph","content":"

Disadvantages:

\n"},{"acf_fc_layout":"bullet_list","items":[{"text":"This method is much more complex to use and requires a sophisticated formula. It’s probably better to find the right tool to compute it for you."}]},{"acf_fc_layout":"paragraph","content":"

Of note, if we were to use the previous ‘simple’ method on the same numbers, we would have the following results :

\n"},{"acf_fc_layout":"paragraph","content":"

($2500)/($1200+$800+$700)*(30+31+30) = 84 days.

\n"},{"acf_fc_layout":"paragraph","content":"

You can see that the result is a bit different, and that’s because the countback method takes into account the growing revenues, as opposed to the simple formula.

\n"},{"acf_fc_layout":"paragraph","content":"

Whatever method you use, you now have a basis for comparison.

\n"},{"acf_fc_layout":"space_block"},{"acf_fc_layout":"hubspot_cta","id":"8df0d460-70d0-40c2-bea0-b8236477d27a","alt":"CTA"},{"acf_fc_layout":"space_block"},{"acf_fc_layout":"heading","text":"Conclusion: what’s important to know about DSO?","level":"h2"},{"acf_fc_layout":"paragraph","content":"

Hopefully, you now understand why you should measure your DSO and how to calculate it.

\n"},{"acf_fc_layout":"paragraph","content":"

At Upflow, we’ve spoken to hundreds of CFOs and CEOs, and the reality is that way too often, companies don’t measure their DSO. And that’s a shame, because as they say, “’if you can’t measure it, you can’t improve it’”

\n"},{"acf_fc_layout":"paragraph","content":"

So here is our advice regarding your DSO:

\n"},{"acf_fc_layout":"bullet_list","items":[{"text":"Start measuring it now and compare it to your payment terms. This will give you a sense of how much room for improvement you have."},{"text":"Don’t focus too much on “how” you calculate it, but rather focus on measuring it consistently and regularly. The best CFOs track DSO on a daily basis and report their average DSO monthly to their board."},{"text":"Whatever your starting point is, make sure that your DSO moves in the right direction. Down. Most of the time growing companies tend to focus on revenues and other metrics and forget about the cash collection. By implementing systematic cash collection processes, you will quickly see the effects on your DSO. "}]},{"acf_fc_layout":"paragraph","content":"

By regularly measuring your DSO you at least have a KPI that helps you to track your cash collection efficiency.

\n"},{"acf_fc_layout":"paragraph","content":"

Final note, as a CEO, CFO, or Finance professional, if you want to know more about your current and historical DSO, you can just create a free account with us. You will not only uncover your DSO numbers but also discover how Upflow can help you implement systematic cash collection processes for both you and your teams, helping to lower DSO quickly.

\n"},{"acf_fc_layout":"paragraph","content":"

We’d love to hear your feedback on your DSO calculations! Drop us a line at hello@upflow.io

\n"}],"primary_category":{"term_id":393,"name":"Reduce DSO","slug":"reduce-dso","term_group":0,"term_taxonomy_id":116,"taxonomy":"category","description":"DSO is a crucial metric to track: it indicates how long it takes you to get paid by your clients. The closer it is to your payment terms, the better. Here you'll find articles and resources to help you reduce your DSO and get your business on the right track.","parent":0,"count":9,"filter":"raw"},"related_author_id":10619,"right_sidebar_call_to_action_id":"1bc55892-19e2-4952-833e-4c0aa95ea224","right_sidebar_call_to_action_alt":"dso","date_modified":"29/07/2026","og_image":false,"og_title":"","og_description":"","canonical_mode":"auto","x_default_mode":"auto","noindex":false,"nofollow":false,"_taxonomies":{"category":[{"id":374,"name":"AR metrics","slug":"ar-metrics","description":"Tracking your receivable KPIs is crucial to mesure the efficiency of your cash collection. But which metric should you track? And how can you calculate and improve them? Have a look at our dedicated articles.","parent":null},{"id":393,"name":"Reduce DSO","slug":"reduce-dso","description":"DSO is a crucial metric to track: it indicates how long it takes you to get paid by your clients. The closer it is to your payment terms, the better. Here you'll find articles and resources to help you reduce your DSO and get your business on the right track.","parent":null}],"translation_priority":[{"id":11,"name":"Optional","slug":"optional","description":"","parent":null}]}},"publishedAt":"August 19, 2022","publishedAtIso":"2022-08-19T02:00:00Z","modifiedAtIso":"$undefined"},{"title":"CFOs: Why Are AR Dashboards Crucial for Your Growth?","description":"Having a fancy AR dashboard is great! But what does it help with exactly? And why is it so important to track AR metrics?","image":"https://cms.upflow.dev.3codes.io/wp-content/uploads/2022/07/ar-dashboard.png","imageAlt":"","fields":{"link":"/blog/ar-metrics/ar-dashboard","_taxonomies":{"article_type":[{"id":374,"name":"AR metrics","slug":"ar-metrics","description":""}]},"author":{"name":"Alex Louisy","image":"https://cms.upflow.dev.3codes.io/wp-content/uploads/2026/07/7.png","description":"$63","position":"Co-founder and CEO of Upflow","slug":"alexandre"}},"acf":{"seo_title":"CFOs: why are AR Dashboards Crucial for your Growth? ","seo_description":"Tracking AR metrics is crucial for all businesses. The best option to monitor these important KPIs? Having a dedicated AR dashboard. One that’s specially designed for this purpose. ","body":[{"acf_fc_layout":"paragraph","content":"

Having a fancy AR dashboard is great! But what does it help with exactly? Tracking AR metrics helps to know what’s going on in your business and how efficient your collection process is.

\n"},{"acf_fc_layout":"paragraph","content":"

Overall, monitoring your accounts receivable KPIs is essential to:

\n"},{"acf_fc_layout":"bullet_list","items":[{"text":"Manage your cash flow. "},{"text":"

Make sure your AR strategy works.

"}]},{"acf_fc_layout":"paragraph","content":"

Information is power, and reliable data assists you in smart decision-making.

\n"},{"acf_fc_layout":"paragraph","content":"

While tracking these metrics helps sharpen your strategy, the way they are tracked isn’t always cutting-edge. Some financial teams still rely on manual spreadsheets to track their AR metrics, while others use an in-built feature of one of their already existing software. These options are neither the most efficient nor the most reliable.

\n"},{"acf_fc_layout":"paragraph","content":"

The best option to monitor these important KPIs? It’s having a dedicated AR dashboard. One that’s specially designed for this purpose. As such, it will offer all the relevant reports you need to stay on top of your accounts receivable process.

\n"},{"acf_fc_layout":"paragraph","content":"

That’s where we come in! Upflow is an AR software that allows you to get paid more easily and more quickly. Our in-house tool offers a dedicated analytics feature that allows you to track your AR reports metrics easily.

\n"},{"acf_fc_layout":"paragraph","content":"

That includes:

\n"},{"acf_fc_layout":"bullet_list","items":[{"text":"Cash forecasting, "},{"text":"Billing cohorts, "},{"text":"DSO reports "},{"text":"

And much more!

"}]},{"acf_fc_layout":"paragraph","content":"

Curious to know more about AR dashboards in general, and what we offer specifically? Keep reading!

\n"},{"acf_fc_layout":"hubspot_cta","id":"8df0d460-70d0-40c2-bea0-b8236477d27a","alt":"call to action demo request"},{"acf_fc_layout":"space_block"},{"acf_fc_layout":"heading","text":"B2B Companies: Which AR Metrics Should You Be Tracking? ","level":"h2"},{"acf_fc_layout":"paragraph","content":"

Before we get into the specificities your AR dashboard should have to foster your growth, let’s take a moment to see which metrics to track in the first place:

\n"},{"acf_fc_layout":"space_block"},{"acf_fc_layout":"heading","text":"Days Sales Outstanding.","level":"h3"},{"acf_fc_layout":"paragraph","content":"

Your days sales outstanding is the average number of days it takes your customers to pay you. It’s a great indicator of your future cash flow and it helps prevent any liquidity problems.

\n"},{"acf_fc_layout":"paragraph","content":"

You get it by making a ratio between your accounts receivable and your sales over a time period. You can calculate it using the simple method, or the countback method.

\n"},{"acf_fc_layout":"paragraph","content":"

Not sure which one to use? Read about the best way to calculate your DSO.

\n"},{"acf_fc_layout":"paragraph","content":"

Using AR software means you can use the most accurate method without having to spend a lot of energy calculating it. It’s more time spent on actually improving your DSO!

\n"},{"acf_fc_layout":"paragraph","content":"

Upflow’s tip: Ideally, you want your DSO to be as close to your payment terms as possible. When your DSO is on the higher side, that’s when liquidity problems start to arise. If that’s your case, look into improving your Dso as soon as possible.

\n"},{"acf_fc_layout":"space_block"},{"acf_fc_layout":"heading","text":"Aging Reports.","level":"h3"},{"acf_fc_layout":"paragraph","content":"

Your Aging report is a visual representation of the unpaid invoices classed in different categories:

\n"},{"acf_fc_layout":"bullet_list","items":[{"text":"0 to 30 days,"},{"text":"30 to 60 days,"},{"text":"60 to 90 days,"},{"text":"+ 90 days."}]},{"acf_fc_layout":"paragraph","content":"

Concretely, an aging report is a list of the invoices your clients haven’t paid yet, with details such as your customers’ contact, the amount due, and the invoice’s original due date. At a glance, you can see within which category invoices are piling up. An AR software will generate this report for you automatically, so you can quickly identify your risky accounts.

\n"},{"acf_fc_layout":"paragraph","content":"

Aging reports help finance teams decide which invoices are a priority to collect to prevent unpaid invoices on your end.

\n"},{"acf_fc_layout":"paragraph","content":"

Upflow’s tip: Keeping a close eye on your 60-90 days bucket is essential, as it’s an indicator of a possible future cash flow problem and bad debt risk.

\n"},{"acf_fc_layout":"paragraph","content":"

Need help calculating your top AR metrics? Have a look at our free spreadsheet.

\n"},{"acf_fc_layout":"hubspot_cta","id":"ab85080f-1635-4491-b739-2e6fb6f385b7","alt":"call to action free spreadsheet"},{"acf_fc_layout":"space_block"},{"acf_fc_layout":"heading","text":"Accounts Receivable Turnover Ratio.","level":"h3"},{"acf_fc_layout":"paragraph","content":"

Your accounts receivable turnover ratio measures how well your company collects money from its customers. An account receivable is basically a credit extended to your clients. Your turnover ratio measures how well this debt is collected.

\n"},{"acf_fc_layout":"paragraph","content":"

Upflow’s tip: A high turnover ratio is what to aim for, but not too high. You want to strike the right balance between making it easy for your customers to buy from you, but not being too generous with your credit terms.

\n"},{"acf_fc_layout":"space_block"},{"acf_fc_layout":"heading","text":"Collection Effectiveness Index.","level":"h3"},{"acf_fc_layout":"paragraph","content":"

Your Collection Effectiveness Index (CEI) tracks how much of your accounts receivable was collected over a given time period. It compares the accounts receivable that were collectible to the ones that were actually collected.

\n"},{"acf_fc_layout":"paragraph","content":"

It’s complementary to your DSO, which doesn’t actually take into account when invoices are paid or the amounts due.

\n"},{"acf_fc_layout":"paragraph","content":"

Upflow tip: The closer your CEI is to 100%, the better – and it should always be over 80%!

\n"},{"acf_fc_layout":"space_block"},{"acf_fc_layout":"heading","text":"Average Day Delinquent.","level":"h3"},{"acf_fc_layout":"paragraph","content":"

Average Day Delinquent (or ADD) tracks how efficient your AR process is. It doesn’t take into account your invoices paid within your payment terms, just the ones that are late.

\n"},{"acf_fc_layout":"paragraph","content":"

It’s expressed in the average number of days it takes your company to collect those late invoices. To do that, you use both your DSO and your best possible DSO (which uses your current accounts receivable).

\n"},{"acf_fc_layout":"paragraph","content":"

Your Average Day Delinquent shows how effective your collections processes are at turning your accounts receivable into cash. A high ADD means your customers take a long time to pay you.

\n"},{"acf_fc_layout":"paragraph","content":"

Contrary to your DSO which covers a period of time, your ADD tells you how late your unpaid invoices are paid at the moment. That’s why it’s important to look at both to get an accurate picture of your AR process.

\n"},{"acf_fc_layout":"paragraph","content":"

Upflow’s tip: It’s important to be proactive about your collection by optimizing your billing process. You can also set up automatic payment reminders to collect your invoices more quickly.

\n"},{"acf_fc_layout":"space_block"},{"acf_fc_layout":"heading","text":"Cash Forecast.","level":"h3"},{"acf_fc_layout":"paragraph","content":"

Cash forecasting isn’t a metric per se, but it’s a great feature some AR software (like Upflow!) have.

\n"},{"acf_fc_layout":"paragraph","content":"

With cash forecasting, you can know exactly how much cash you will have at a given time. That’s helpful for:

\n"},{"acf_fc_layout":"bullet_list","items":[{"text":"Better cash management,"},{"text":"Problem-solving,"},{"text":"Stakeholder satisfaction,"},{"text":"

Forward planning.

"}]},{"acf_fc_layout":"paragraph","content":"

It’s something you can calculate manually, using the direct method or the indirect method.

\n"},{"acf_fc_layout":"paragraph","content":"

While they’re easy on paper, they’re however not as easy to concretely calculate. They require chasing data from your financial statements and/or your bank account and are error-prone. The alternative is to use an AR software that does that for you.

\n"},{"acf_fc_layout":"paragraph","content":"

Upflow has a built-in cash inflow feature: based on your previous sales and AR collection speed, our software is able to forecast automatically how much cash will come in in the next 90 days.

\n"},{"acf_fc_layout":"paragraph","content":"

Balance this with your expenses and accounts payable to get a complete cash flow forecast! Cash forecasting is essential to any business and especially fast-growing ones.

\n"},{"acf_fc_layout":"paragraph","content":"

Upflow tip: if you want to get more predictability in your cash flow, consider implementing (or improving) a subscription-based business model.

\n"},{"acf_fc_layout":"space_block"},{"acf_fc_layout":"heading","text":"Billing Cohorts.","level":"h3"},{"acf_fc_layout":"paragraph","content":"

Billing cohorts are graphs of your invoices gathered in different groups, alongside the cumulative percentage of invoices that were paid (see example below)

\n"},{"acf_fc_layout":"image","image":"https://cms.upflow.dev.3codes.io/wp-content/uploads/2022/06/billing-cohorts-widget.png","caption":""},{"acf_fc_layout":"paragraph","content":""},{"acf_fc_layout":"paragraph","content":"

You can read them horizontally and vertically:

\n"},{"acf_fc_layout":"bullet_list","items":[{"text":"Horizontally, it tells you how efficient your collections processes are."},{"text":"Vertically, it tells you if your collection processes improved with time."}]},{"acf_fc_layout":"paragraph","content":"

Billing cohorts tie everything together! It’s the super-tool that gives you an overview of how well your accounts receivable processes are performing. It’s usually computed by software, but you can do it manually (or on spreadsheets) by grouping all the invoices sent on a given month together. Then, you need to calculate the cumulative percentages of the paid invoices within the different time brackets.

\n"},{"acf_fc_layout":"paragraph","content":"

The easier alternative is to use an AR software, which allows you to spend more time on improving your AR process! If you use Upflow, you can click straight on your billing cohorts to see which accounts are outstanding.

\n"},{"acf_fc_layout":"paragraph","content":"

Upflow’s tip: Checking your billing cohorts regularly (daily or weekly) is important to stay on top of things and make sure you don’t encounter any cash flow problems.

\n"},{"acf_fc_layout":"paragraph","content":"

All these metrics and visual representations together will give you an accurate idea of how well your accounts receivable processes are doing. Need help tracking them? Have a look at our free spreadsheet

\n"},{"acf_fc_layout":"hubspot_cta","id":"45d64f0e-66b1-4cea-8d72-f2fec1726ceb","alt":"call to action free spreadsheet"},{"acf_fc_layout":"space_block"},{"acf_fc_layout":"heading","text":"Stop Tracking Your AR Metrics Manually!","level":"h2"},{"acf_fc_layout":"space_block"},{"acf_fc_layout":"paragraph","content":"

As you’ve seen, there are a few metrics to track in your business – and they’re just our list of essentials!

\n"},{"acf_fc_layout":"paragraph","content":"

While we could say that it’s perfectly acceptable to calculate them manually or using spreadsheets, we really don’t think it’s the best move for you. Here’s why:

\n"},{"acf_fc_layout":"bullet_list","items":[{"text":"

It’s time-consuming: calculating any and all KPIs manually or using excel formulas means you’ll have your hands full. It takes a lot of time to find the correct number, do the calculation, write it down… and do it all over again when you want the newest numbers. Honestly, we think you have better things to do with your time (like strategic planning)

"},{"text":"It’s error-prone: doing it manually increases your probability of getting it wrong. Inaccuracy in your results can come from a simple computing mistake (we’re all humans) but also from incorrect numbers. There is little point in dedicating time to your AR collection if you’re not able to accurately track your progress. "}]},{"acf_fc_layout":"bullet_list","items":[{"text":"

It’s not accurate: if you need to chase your data over different sources, then it’s very likely that your results won’t be accurate. Even with the best intentions, jumping through hoops to find the latest accurate data rarely amounts to accurate calculations.

"},{"text":"It’s difficult to interpret: comparing all your metrics isn’t as easy when you’re juggling different spreadsheets or software. And what if you suddenly need to adjust a variable? It means starting it all over again. Having all your AR metrics within one ar dashboard makes more sense, as you can compare your data easily in a few clicks. "}]},{"acf_fc_layout":"paragraph","content":"

Now that we’ve looked at the reasons not to use spreadsheets to get your AR metrics, let’s deep dive into the alternative: automated software!

\n"},{"acf_fc_layout":"heading","text":"Why Are Automated Accounts Receivable Dashboards Better for Your Growth?","level":"h2"},{"acf_fc_layout":"paragraph","content":"

The short answer to this question is: accounts receivable software will make your job so much easier. It will free up your time that can in turn be used for planning for your growth.

\n"},{"acf_fc_layout":"paragraph","content":"

For the detailed benefits of using software, read on!

\n"},{"acf_fc_layout":"space_block"},{"acf_fc_layout":"heading","text":"The Benefits of Using Software for your Accounts Receivable Dashboard.","level":"h3"},{"acf_fc_layout":"space_block"},{"acf_fc_layout":"heading","text":"1. AR Software is Designed for AR Dashboards.","level":"h4"},{"acf_fc_layout":"paragraph","content":"

Sure, spreadsheets are versatile. They can also get complicated and not very user-friendly, plus all the other cons we saw before.

\n"},{"acf_fc_layout":"paragraph","content":"

What about using a billing tool or accounting software? While those are a must-have for any business, they are not specifically designed for accounts receivable collection.

\n"},{"acf_fc_layout":"paragraph","content":"

Their features are therefore limited and so are the dashboards they offer. This means to get to a dashboard with all the metrics you need, you’ll need several tools, at best. And… we’re back to a complicated process that requires switching back and forth.

\n"},{"acf_fc_layout":"paragraph","content":"

AR software like Upflow on the other hand has been created with your accounts receivable in mind. Its sole purpose is to streamline your collection process.

\n"},{"acf_fc_layout":"paragraph","content":"

That shows up in:

\n"},{"acf_fc_layout":"bullet_list","items":[{"text":"The features that are offered: you get a dashboard with all your AR metrics and many features, including drill-down (which allows you to zoom in on any metric with a simple click on your dashboard) and some personalization on your dashboard and in your reports. "}]},{"acf_fc_layout":"bullet_list","items":[{"text":"The way it’s all presented: say bye-bye to complicated navigation and welcome to a good user experience, making your ar experience much smoother for you and your collaborators. "}]},{"acf_fc_layout":"paragraph","content":""},{"acf_fc_layout":"heading","text":"2. AR Software Centralizes your Data.","level":"h4"},{"acf_fc_layout":"paragraph","content":""},{"acf_fc_layout":"paragraph","content":"

Your AR software is a building block in your finance stack. Because it integrates with your other software like your accounting tool, billing software, and even CRM, it gets your data in real-time.

\n"},{"acf_fc_layout":"paragraph","content":"

As we are a SaaS, our tool also grows with your business needs over the years.

\n"},{"acf_fc_layout":"paragraph","content":"

Having one source of truth when it comes to your accounts receivable process makes it easier to work on it – individually and at your company’s scale.

\n"},{"acf_fc_layout":"paragraph","content":"

You know the information you get is always up-to-date and reliable as Upflow automatically synchronizes your data across your finance stack – not just once a day.

\n"},{"acf_fc_layout":"paragraph","content":"

On Upflow, you can also leave internal reminders to your team and attribute tasks to different people. It is your hub when it comes to your AR collection.

\n"},{"acf_fc_layout":"paragraph","content":""},{"acf_fc_layout":"heading","text":"3. AR software Optimizes your Metric Tracking.","level":"h4"},{"acf_fc_layout":"paragraph","content":"

Because the information is in real-time and readily available, the dashboard creation can be automated too. On Upflow, you can compare your DSO over different periods, and have an overview of your aging report in a few clicks.

\n"},{"acf_fc_layout":"paragraph","content":"

That’s also handy for report creation, as you can create the one you need quickly. Perfect for any last-minute meeting!

\n"},{"acf_fc_layout":"paragraph","content":"

All of this saves you time and energy that can be spent on actually implementing strategies to improve your company’s financial health.

\n"},{"acf_fc_layout":"paragraph","content":""},{"acf_fc_layout":"heading","text":"How to Build the Best Automated AR Dashboard? ","level":"h3"},{"acf_fc_layout":"space_block"},{"acf_fc_layout":"paragraph","content":"

You could spend weeks designing your perfect AR dashboard, using different software and integrations to be exactly as you want it.

\n"},{"acf_fc_layout":"paragraph","content":"

Or … (you know where we’re going here, right?) you could use an already-made software.

\n"},{"acf_fc_layout":"paragraph","content":"

Once more, it depends on your priorities. But we bet that building an in-house automated AR dashboard isn’t the best use of your time or your developers’ time. As your company grows, it’s crucial to learn to decipher what’s important to do yourself and what’s best to delegate or when it’s time to make use of automation. We believe that AR dashboards are part of the latter category.

\n"},{"acf_fc_layout":"paragraph","content":"

When you use Upflow, it is our responsibility to make sure our product works for you. If there is any technical problem, you contact us and we’ll sort it out.

\n"},{"acf_fc_layout":"paragraph","content":"

If your in-house dashboard stops working on the other hand… that’s on you, and that might not be on everybody’s top priority list. It also means we are in charge of producing all the documentation and faqs your team might need.

\n"},{"acf_fc_layout":"paragraph","content":"

On top of tracking metrics, Upflow offers a complete solution to optimize your accounts receivable. We help you optimize your process from beginning to end – that includes payment reminder templates to send to your clients, too.

\n"},{"acf_fc_layout":"hubspot_cta","id":"8df0d460-70d0-40c2-bea0-b8236477d27a","alt":"call to action demo request"},{"acf_fc_layout":"space_block"},{"acf_fc_layout":"paragraph","content":""},{"acf_fc_layout":"paragraph","content":"

Key Takeaways:

\n"},{"acf_fc_layout":"paragraph","content":""},{"acf_fc_layout":"bullet_list","items":[{"text":"

AR metrics are essential performance indicators to track in any business, but even more when you grow fast, as cash flow can quickly become a problem.

"},{"text":"Tracking your AR KPIs ensures your company doesn’t encounter any liquidity problems and manages its cash flow in the best way possible to reduce overdue receivables."}]},{"acf_fc_layout":"bullet_list","items":[{"text":"

We recommend tracking the following 7 AR metrics: DSO, CEI, aging report, billing cohort, turnover ratio, cash forecast, ADD.

"},{"text":"

The manual process of calculating them takes a lot of time and is error-prone. It’s better to use an AR software that will do that automatically with the latest data.

"},{"text":"Building an AR dashboard template yourself isn’t the best use of your time either, and it means an added responsibility in case of technical problems."}]},{"acf_fc_layout":"bullet_list","items":[{"text":"

Automated AR software like Upflow are perfect for creating AR dashboards and reports. We make tracking your KPIs easy, so you can spend more time on actual strategy and implementation.

"},{"text":"Saving your team from tedious tasks means being able to optimize your whole AR process and ensuring your company’s financial health. "}]},{"acf_fc_layout":"paragraph","content":""}],"primary_category":{"term_id":374,"name":"AR metrics","slug":"ar-metrics","term_group":0,"term_taxonomy_id":97,"taxonomy":"category","description":"Tracking your receivable KPIs is crucial to mesure the efficiency of your cash collection. But which metric should you track? And how can you calculate and improve them? Have a look at our dedicated articles.","parent":0,"count":27,"filter":"raw"},"related_author_id":10619,"right_sidebar_call_to_action_id":"","right_sidebar_call_to_action_alt":"","date_modified":"29/07/2026","og_image":false,"og_title":"","og_description":"","canonical_mode":"auto","x_default_mode":"auto","_taxonomies":{"category":[{"id":374,"name":"AR metrics","slug":"ar-metrics","description":"Tracking your receivable KPIs is crucial to mesure the efficiency of your cash collection. But which metric should you track? And how can you calculate and improve them? Have a look at our dedicated articles.","parent":null}],"translation_priority":[{"id":11,"name":"Optional","slug":"optional","description":"","parent":null}]}},"publishedAt":"July 26, 2022","publishedAtIso":"2022-07-26T02:00:00Z","modifiedAtIso":"$undefined"},{"title":"What Is the Best Method to Analyze Your Receivables?","description":"Your AR tells you how well your business is doing, and helps you manage your cash better – now and in the future. But choosing the right method to analyze your accounts receivables isn’t easy. Excel seems like an obvious idea, but is it the best way? What about accounting software? Is there a better […]","image":"https://cms.upflow.dev.3codes.io/wp-content/uploads/2022/07/analysis-of-receivables-method.png","imageAlt":"","fields":{"link":"/blog/ar-metrics/analysis-of-receivables-method","_taxonomies":{"article_type":[{"id":374,"name":"AR metrics","slug":"ar-metrics","description":""}]},"author":{"name":"Alexandre Antoine","image":"https://cms.upflow.dev.3codes.io/wp-content/uploads/2026/07/9-1.png","description":"

\n","position":"Finance Director at Upflow","slug":"alex-finance-director"}},"acf":{"seo_title":"What Is the Best Method to Analyze Your Receivables?","seo_description":"Your Accounts Receivables tell a story about your company: that of its cash flow. Tracking your AR means ensuring your business’ liquidity. What is the best method to analyze your Accounts Receivable?","body":[{"acf_fc_layout":"paragraph","content":"

Your Accounts Receivables tell a story about your company: that of its cash flow. Tracking your AR means ensuring your business’ liquidity at all times. Sales are good, but it’s the concrete cash inflows that matter.

\n"},{"acf_fc_layout":"paragraph","content":"

Your AR tells you how well your business is doing, and helps you manage your cash better – now and in the future. It is quintessential to have an accurate picture of when your cash is coming in – especially for small businesses and scale-ups.

\n"},{"acf_fc_layout":"paragraph","content":"

For that, you can track different AR-related metrics: your total AR of course, but also your DSO, CEI, aging report and billing cohorts. These are the essential metrics to track for scaling companies.

\n"},{"acf_fc_layout":"paragraph","content":"

What is the best method to analyze your Accounts Receivable? Using Excel seems like an obvious idea, but is it the best way? What about accounting software? Is there a better alternative?

\n"},{"acf_fc_layout":"paragraph","content":"

To cut to the chase: the best accounts receivable method is one that’s done through an AR software – like Upflow. Automation makes your life easier, so you can get paid faster and focus on your business’s core activities.

\n"},{"acf_fc_layout":"hubspot_cta","id":"8df0d460-70d0-40c2-bea0-b8236477d27a","alt":"request a demo"},{"acf_fc_layout":"space_block"},{"acf_fc_layout":"heading","text":"The Manual Method of Analyzing AR (and Why It’s Not Enough).","level":"h2"},{"acf_fc_layout":"space_block"},{"acf_fc_layout":"heading","text":"How to Record and Analyze Your Receivables.","level":"h3"},{"acf_fc_layout":"paragraph","content":"

To track and analyze your AR, you need to account for 2 things:

\n"},{"acf_fc_layout":"bullet_list","items":[{"text":"

Your accounts receivables (or credit sales),

"},{"text":"Your bad debt allowance."}]},{"acf_fc_layout":"space_block"},{"acf_fc_layout":"heading","text":"Calculating your AR.","level":"h4"},{"acf_fc_layout":"space_block"},{"acf_fc_layout":"paragraph","content":"

Every company should be tracking their AR just as they track their sales.

\n"},{"acf_fc_layout":"paragraph","content":"

When a sale takes place, two scenarios can happen:

\n"},{"acf_fc_layout":"ordered_list","items":[{"text":"

Cash is directly exchanged for the product or service.

"},{"text":"The invoice’s due date is set for a later date. That’s a credit sale, which will increase your AR credit balance"}]},{"acf_fc_layout":"paragraph","content":"

In and of itself, calculating your AR is quite straightforward: you just need to make a list of all the invoices that are owed to you. We’ll see later on how this process might not be as straightforward as it seems.

\n"},{"acf_fc_layout":"paragraph","content":"

That’s part one of your AR done. In financial accounting, there is another part: accounting for your uncollectible invoices.

\n"},{"acf_fc_layout":"space_block"},{"acf_fc_layout":"heading","text":"Bad Debt Expense: How to Track Uncollectible Accounts.","level":"h4"},{"acf_fc_layout":"space_block"},{"acf_fc_layout":"paragraph","content":"

Cash-basis accounting doesn’t have to bother with bad debt write-off, as this method of accounting only records transactions when cash is exchanged.

\n"},{"acf_fc_layout":"paragraph","content":"

In accrual accounting, however, a transaction is recorded when a sale of a product or service is agreed upon. However, some invoices end up never being paid: they’re deemed uncollectible. Uncollectible accounts are also called doubtful accounts, or bad debt.

\n"},{"acf_fc_layout":"paragraph","content":"

That’s a risk that comes with credit sales, which should be accounted for as an operational expense in your income statement. Using the aging method will help you determine the percentage of your overdue invoices that is likely to turn into uncollectible accounts.

\n"},{"acf_fc_layout":"paragraph","content":"

When an invoice you recorded turns into bad debt, you then have to make an adjusting entry in your books.

\n"},{"acf_fc_layout":"paragraph","content":"

There are two ways to do this:

\n"},{"acf_fc_layout":"bullet_list","items":[{"text":"

The direct write-off method: you manually add a journal entry to perform a “write-off”. The amount of the adjusting entry has to match your previously recorded one to keep your t-accounts balanced. This is a straightforward method, used when you only have a few uncollectible receivables over the year.

"},{"text":"The allowance method: you plan ahead by allocating a percentage of your total credit sales to a contra asset account. This allowance account serves as a budget for your doubtful accounts. "}]},{"acf_fc_layout":"paragraph","content":"

When a bad debt does happen, you can subtract it from this account to buffer your losses. You then need to make another journal entry to take this amount from your balance of allowance.

\n"},{"acf_fc_layout":"paragraph","content":"

If your company uses a lot of credit sales as a sales method, using the allowance method makes more sense. The normal balance of allowance – the percentage you’d set aside for bad debt – depends on your company and its typical turnover and AR amount.

\n"},{"acf_fc_layout":"paragraph","content":"

Once you’ve accounted for your bad debt allowance, you can get your realizable value of accounts receivable, which is the amount you can expect to receive. It is your total current receivable minus your bad debt, which affects your accounts receivable debit balance (or credit balance).

\n"},{"acf_fc_layout":"paragraph","content":"

Using the realizable value of accounts is a conservatism concept of conservatism accounting, that has the advantage of giving you a realistic picture of what to expect in terms of future cash inflow. It’s also useful in order to be more accurate in your financial statements, as you’re factoring in your potential unpaid invoices.

\n"},{"acf_fc_layout":"paragraph","content":"

Another option is to turn your overdue accounts receivable into notes receivable, which act as a promise to be paid. It gives your customer more time to pay you, and shows up as an asset on your balance sheet:

\n"},{"acf_fc_layout":"bullet_list","items":[{"text":"A current asset if the note is due at the end of the current year, "},{"text":"A non-current asset for longer time periods."}]},{"acf_fc_layout":"paragraph","content":"

Now you know what to track in your AR, let’s have a look at how to do it.

\n"},{"acf_fc_layout":"space_block"},{"acf_fc_layout":"heading","text":"Analysis of Receivables Method 1: Excel.","level":"h3"},{"acf_fc_layout":"space_block"},{"acf_fc_layout":"paragraph","content":"

The reflex of many financial professionals (and business owners) is to turn to spreadsheets for tracking their accounts receivables.

\n"},{"acf_fc_layout":"paragraph","content":"

You can just open up a new Excel file and add your AR data. Remember to add your invoice amount, due date, and also the name and contact of your clients.

\n"},{"acf_fc_layout":"paragraph","content":"

A big part of staying on top of your AR is following up on your invoices, so including contact information will make your life easier down the line.

\n"},{"acf_fc_layout":"paragraph","content":"

Once your AR info is all updated on your Excel, you’re done! While this method has the advantage of being easy and straightforward on paper… The reality can be different.

\n"},{"acf_fc_layout":"paragraph","content":"

Need help tracking your main AR metrics? Have a look at our free spreadsheet.

\n"},{"acf_fc_layout":"hubspot_cta","id":"ab85080f-1635-4491-b739-2e6fb6f385b7","alt":"download spreadsheet"},{"acf_fc_layout":"space_block"},{"acf_fc_layout":"heading","text":"The Problem with Using Spreadsheet for AR Tracking and Analysis.","level":"h3"},{"acf_fc_layout":"space_block"},{"acf_fc_layout":"paragraph","content":"

There are several downsides to using a spreadsheet for tracking your AR – let alone extracting any metrics and analysis from them:

\n"},{"acf_fc_layout":"bullet_list","items":[{"text":"

It’s not centralized: if you already use spreadsheets in your financial accounting, you know they’re a nightmare to keep up-to-date. Unless you (and your team) are very thorough at recording each and every invoice, you’ll have a hard time keeping it up-to-date. And if you can’t trust that your Excel is accurate, it defeats its own purpose.

"},{"text":"

It’s not time-savvy: even if you’re meticulous about tracking your invoices, you’ll probably often have to switch between software (and possibly people) to ensure you have the latest data. You also have to manually track any and all contacts you have with your client regarding their pending invoice.

"},{"text":"It’s not accurate: between your never-quite up-to-date data, the manual entry of formulas needed to calculate your AR metrics, and the human errors waiting to happen, you cannot be 100% sure the data displayed is accurate.
"}]},{"acf_fc_layout":"paragraph","content":"

The bottom line is: Excel spreadsheets aren’t efficient. As you deal with an increasing number of clients and your turnover increases, you’ll no longer have the time to do it manually.

\n"},{"acf_fc_layout":"paragraph","content":"

So, what’s a better method to deal with your AR tracking and analyzing?

\n"},{"acf_fc_layout":"space_block"},{"acf_fc_layout":"heading","text":"Analyzing Your AR With Your Accounting Software.","level":"h2"},{"acf_fc_layout":"space_block"},{"acf_fc_layout":"heading","text":"Analysis of Receivables Method 2: Accounting Software.","level":"h3"},{"acf_fc_layout":"space_block"},{"acf_fc_layout":"paragraph","content":"

You very likely already have accounting software as part of your finance stack, so it makes sense to consider using it for your accounts receivable analysis too.

\n"},{"acf_fc_layout":"paragraph","content":"

Most software have a few AR-related features alongside their core activity, and can help you keep track of your pending invoices. Some also have a dashboard with one or two AR metrics like your DSO or billing cohort.

\n"},{"acf_fc_layout":"paragraph","content":"

The good thing about your accounting software is that it’s already integrated into your finance ecosystem. All the data most likely synchronizes with your other software like your billing tool, or even your CRM. If that’s not the case – your accounting software might need an upgrade!

\n"},{"acf_fc_layout":"space_block"},{"acf_fc_layout":"heading","text":"The problem with Using Accounting Software for Your AR.","level":"h3"},{"acf_fc_layout":"space_block"},{"acf_fc_layout":"paragraph","content":"

Using your accounting software, as we’ve just seen, is a convenient option. But… there is a but: you have to pay attention to a few things:

\n"},{"acf_fc_layout":"space_block"},{"acf_fc_layout":"heading","text":"Make sure you have one source of truth. ","level":"h4"},{"acf_fc_layout":"space_block"},{"acf_fc_layout":"paragraph","content":"

The one source of truth is a concept we’re adamant about at Upflow. It means that you have one tool that has all the information you need for your financial accounting in one place.

\n"},{"acf_fc_layout":"paragraph","content":"

No switching between different software or tabs, no doubting if your numbers are accurate. Your one source of truth is the place you can go to find your latest data, the one that has all the most up-to-date and accurate information at all times.

\n"},{"acf_fc_layout":"paragraph","content":"

Your other software synchronizes with it, it’s the hub that links them all together.

\n"},{"acf_fc_layout":"space_block"},{"acf_fc_layout":"heading","text":"Accounting Software is Designed for Accounting. ","level":"h4"},{"acf_fc_layout":"space_block"},{"acf_fc_layout":"paragraph","content":"

It sounds obvious, and yet it’s essential to understand that. Even with a few handy AR features, accounting software will always be the best at accounting – that’s what they do!

\n"},{"acf_fc_layout":"paragraph","content":"

This means that their nice-to-have features are not what the software was originally designed for. Plus, your accounts receivable isn’t where they’re going to be focusing their next development efforts on.

\n"},{"acf_fc_layout":"paragraph","content":"

When it comes to AR, it’s great to be able to track your invoices and look at a few metrics. But it’s even better if you can detect actionable tasks directly from the same software.

\n"},{"acf_fc_layout":"space_block"},{"acf_fc_layout":"heading","text":"Specialized AR Software is The Best Method for AR Analysis. ","level":"h2"},{"acf_fc_layout":"space_block"},{"acf_fc_layout":"heading","text":"Analysis of Receivables Method 3: AR software.","level":"h3"},{"acf_fc_layout":"space_block"},{"acf_fc_layout":"paragraph","content":"

At Upflow, we think the best analysis of receivables is performed with specialized AR software.

\n"},{"acf_fc_layout":"paragraph","content":"

Yes, we may be a little biased, because that’s what we specialize in! We’ve designed our software with financial professionals in mind, to make your life easier. Here is what your AR process would look like using Upflow:

\n"},{"acf_fc_layout":"bullet_list","items":[{"text":"All your data is centralized in real-time. "},{"text":"Your KPIs are calculated using the most accurate formulas and metrics."},{"text":"All your information is presented on a financial dashboard."},{"text":"You can create customized reports that help with your long-term decision-making and financial statements."}]},{"acf_fc_layout":"space_block"},{"acf_fc_layout":"heading","text":"Why AR Software is Best to Analyze Your AR. ","level":"h3"},{"acf_fc_layout":"space_block"},{"acf_fc_layout":"paragraph","content":"

Using a tool like Upflow allows you to streamline your accounts receivable process. One look at your dashboard will give you the insights you needto directly take action straight from within the app.

\n"},{"acf_fc_layout":"paragraph","content":"

No more chasing the latest data. No more losing track of your customer’s contacts. No more leaving it to later because you don’t even know where to begin with your payment reminders.

\n"},{"acf_fc_layout":"paragraph","content":"

Because Upflow is designed for effective collaboration, you can leave internal notes and even reminders to yourself and your team to make sure everyone is on the same page.

\n"},{"acf_fc_layout":"paragraph","content":"

Looking at your aging schedule (or aging reports) will let you know what length of time has passed since your invoice was issued – and in which category your invoices are piling up. It’s a very useful tool for your accounts receivable analysis, and lets you know ahead of time if there might be any cash flow issues coming up.

\n"},{"acf_fc_layout":"paragraph","content":"

On Upflow, you can look at your Days Sales Outstanding and take action to reduce it straight from our software.

\n"},{"acf_fc_layout":"paragraph","content":"

Looking at your billing cohort helps you see which invoices are still unpaid. You can also directly click on customer accounts to see the list of invoices. From there, you can decide to follow up with your client via a phone call, an email, or even a letter!

\n"},{"acf_fc_layout":"paragraph","content":"

Knowing your receivables balance in a matter of seconds has never been easier! And you can rest assured knowing that all information is accurate thanks to real-time synchronization with the rest of your finance stack

\n"},{"acf_fc_layout":"paragraph","content":"

Upflow gives you the option to plan for your doubtful accounts too, by showing you an at-risk rate based on your 90-day overdue invoices. All of that contributes to giving you a more accurate net realizable value.

\n"},{"acf_fc_layout":"hubspot_cta","id":"8df0d460-70d0-40c2-bea0-b8236477d27a","alt":"request a demo"},{"acf_fc_layout":"space_block"},{"acf_fc_layout":"paragraph","content":"

Key Takeaways:

\n"},{"acf_fc_layout":"bullet_list","items":[{"text":"

Tracking Accounts Receivable means knowing your receivables account balance, and knowing how effective your processes are by keeping track of a few key AR metrics.

"},{"text":"

To calculate your receivables balance, you need to have your pending credit sales. You should also be factoring in your bad debt expenses.

"},{"text":"

Your bad debt is invoices that are deemed uncollectible after a certain period of time. Accounting for them can be done by either a direct write-off or by using the allowance method.

"},{"text":"

Concretely, AR tracking is a list of your invoices with their due date, amount and customer contact. Technically speaking, this can be done using Excel spreadsheets, but we don’t recommend it as they can be inaccurate and inefficient.

"},{"text":"

Your accounting software might have a few AR features to help you track and analyze your receivables which is a good start. But at the end of the day, AR is not their expertise and won’t be able to provide you with detailed metrics and actionable insights.

"},{"text":"

The best method to analyze your receivables is to use software specialized in accounts receivable, such as Upflow. It synchronizes your data in real-time so you can trust it to be your one source of truth for your AR. It also provides in-depth analytics to measure the efficiency of your collectible process. And you can take action to improve your workflow straight from the app.

"},{"text":"Upflow is designed for AR, and will help you get paid faster so you can focus on the growth of your business.

"}]}],"primary_category":{"term_id":374,"name":"AR metrics","slug":"ar-metrics","term_group":0,"term_taxonomy_id":97,"taxonomy":"category","description":"Tracking your receivable KPIs is crucial to mesure the efficiency of your cash collection. But which metric should you track? And how can you calculate and improve them? Have a look at our dedicated articles.","parent":0,"count":27,"filter":"raw"},"related_author_id":10617,"right_sidebar_call_to_action_id":"","right_sidebar_call_to_action_alt":"","date_modified":"29/07/2026","og_image":false,"og_title":"","og_description":"","_taxonomies":{"category":[{"id":374,"name":"AR metrics","slug":"ar-metrics","description":"Tracking your receivable KPIs is crucial to mesure the efficiency of your cash collection. But which metric should you track? And how can you calculate and improve them? Have a look at our dedicated articles.","parent":null}],"translation_priority":[{"id":11,"name":"Optional","slug":"optional","description":"","parent":null}]}},"publishedAt":"July 13, 2022","publishedAtIso":"2022-07-13T02:00:00Z","modifiedAtIso":"$undefined"},{"title":"Finance Managers: Make the Best Accounts Receivable Analysis to Grow your SaaS Business.","description":"While it is tempting to glance at your accounts receivable total and call it a day, there is so much more to your A/R! To make the best analysis, you need to make sure that the data you use is accurate. With proper tools, you can get more in-depth analysis to foster your long-term growth.","image":"https://cms.upflow.dev.3codes.io/wp-content/uploads/2022/06/accounts-receivables-analysis.png","imageAlt":"","fields":{"link":"/blog/ar-metrics/accounts-receivables-analysis","_taxonomies":{"article_type":[{"id":374,"name":"AR metrics","slug":"ar-metrics","description":""}]},"author":{"name":"Alexandre Antoine","image":"https://cms.upflow.dev.3codes.io/wp-content/uploads/2026/07/9-1.png","description":"

\n","position":"Finance Director at Upflow","slug":"alex-finance-director"}},"acf":{"seo_title":"Make the Best Accounts Receivable Analysis to Grow your SaaS Business.","seo_description":"A/R are a crucial element of your financial health. Because they influence your cash flow, they can end up threatening your company’s liquidity. Your DSO, CEI, aging report, and turnover ratio will give you important insights into your company’s accounts receivable quality.","body":[{"acf_fc_layout":"paragraph","content":"

Your accounts receivable are the invoices that are yet to be paid by your clients. If your SaaS makes credit sales, you have some type of A/R. By extension, it also designs the process of collecting your invoices.

\n"},{"acf_fc_layout":"paragraph","content":"

A/R are a crucial element of your financial health. Because they influence your cash flow, they can end up threatening your company’s liquidity if not enough are collected on time.

\n"},{"acf_fc_layout":"paragraph","content":"

While it is tempting to glance at your accounts receivable total and call it a day, there is so much more to your A/R! Your DSO, CEI, aging report and turnover ratio will give you important insights about your company’s accounts receivable quality.

\n"},{"acf_fc_layout":"paragraph","content":"

To make the best analysis, you also need to make sure that the data you use is accurate. With the proper tools, you can also get more in-depth analysis to foster your long-term growth.

\n"},{"acf_fc_layout":"paragraph","content":"

Keep reading to find out how exactly!

\n"},{"acf_fc_layout":"paragraph","content":"

Did you know? Upflow is an A/R software that helps you get paid faster. Providing handy A/R features, our analytics features give you the insights you need, when you need them, so you can focus on planning for your growth.

\n"},{"acf_fc_layout":"hubspot_cta","id":"8df0d460-70d0-40c2-bea0-b8236477d27a","alt":"cta request a demo"},{"acf_fc_layout":"space_block"},{"acf_fc_layout":"heading","text":"Why is Accounts Receivables Analysis Important for SaaS? ","level":"h2"},{"acf_fc_layout":"space_block"},{"acf_fc_layout":"heading","text":"Accounts Receivables Influence Your Cash Flow.","level":"h3"},{"acf_fc_layout":"space_block"},{"acf_fc_layout":"paragraph","content":"

Selling by credit is still selling: you need to get paid eventually.

\n"},{"acf_fc_layout":"paragraph","content":"

If you let unpaid invoices accumulate, then insufficient amounts of cash come onto your company’s bank account. What is not collected can turn into bad debts, i.e. the invoices that never get paid.

\n"},{"acf_fc_layout":"paragraph","content":"

Ultimately, that would get you late to pay your accounts payable, slow down your scaling process, and even pose a serious risk of bankruptcy.

\n"},{"acf_fc_layout":"paragraph","content":"

You always can do a write-off of your bad debts (or doubtful accounts) using a contra asset account. This way, they’ll come out as an expense on your income statement. But it’s better to be proactive about your invoices in the first place!

\n"},{"acf_fc_layout":"paragraph","content":"

Getting paid on time, that is to say, according to your payment terms, is key for your business to run smoothly. It allows you to cover both your working capital needs and your investments. More than that, it means you can make accurate cash flow forecasts and plan for your future growth.

\n"},{"acf_fc_layout":"space_block"},{"acf_fc_layout":"heading","text":"Accounts Receivable for SaaS.","level":"h3"},{"acf_fc_layout":"space_block"},{"acf_fc_layout":"paragraph","content":"

That’s also the case when you run a subscription business. Even though your clients are supposed to pay you regularly (monthly, quarterly, yearly, etc.), they might not. Some of them might be late payers, others will have changed payment methods during the period… Honing in on your precise data is how you’ll be able to optimize your processes.

\n"},{"acf_fc_layout":"paragraph","content":"

SaaS especially need to stay up-to-date with their financial data. They evolve in a fast-paced context and tend to offer a wide variety of offers with different payment terms. Knowing what offer works best and how fast they collect their revenue from each stream is essential to not only survive but thrive.

\n"},{"acf_fc_layout":"space_block"},{"acf_fc_layout":"heading","text":"SaaS: Which A/R Metrics Should You Track? ","level":"h2"},{"acf_fc_layout":"space_block"},{"acf_fc_layout":"paragraph","content":"

Before getting into how to best analyze your A/R, let’s look at a few essential KPIs to track.

\n"},{"acf_fc_layout":"paragraph","content":"

Each highlights a different part of your receivable process. Together, they give you a broad understanding of your company and give you insights into what needs to be optimized to keep growing.

\n"},{"acf_fc_layout":"paragraph","content":"

Need help tracking your KPIs? Have a look at our free spreadsheet!

\n"},{"acf_fc_layout":"hubspot_cta","id":"45d64f0e-66b1-4cea-8d72-f2fec1726ceb","alt":"download free spreadsheet"},{"acf_fc_layout":"heading","text":"DSO Analysis.","level":"h3"},{"acf_fc_layout":"space_block"},{"acf_fc_layout":"heading","text":"Saas: Why does your DSO Matter?","level":"h4"},{"acf_fc_layout":"paragraph","content":"

Your DSO (for Days Sales Outstanding) is the number of days it takes on average to get paid by your clients. This number should be as close to your payment terms as possible: 0 if you expect an immediate payment, 30 if your invoices’ due date is a month after they’ve been issued, etc.

\n"},{"acf_fc_layout":"paragraph","content":"

A low DSO means your business runs smoothly, your clients are happy (happy clients tend to pay on time), and your cash flow is predictable.

\n"},{"acf_fc_layout":"paragraph","content":"

If it’s much higher than your payment terms, however, it can threaten your liquidity. A high DSO is a sign to review your credit policies and set up a strategy to course-correct. Find 5 essential steps to reduce your DSO here.

\n"},{"acf_fc_layout":"space_block"},{"acf_fc_layout":"heading","text":"How to Calculate your DSO for SaaS Businesses.","level":"h4"},{"acf_fc_layout":"paragraph","content":"

You have two ways to calculate your days sales outstanding:

\n"},{"acf_fc_layout":"paragraph","content":"

The simple method: you take your Accounts Receivable at the end of your period and divide it by your Gross Sales on the same period. Multiply your result by the number of days in your period.

\n"},{"acf_fc_layout":"paragraph","content":"

This is the most straightforward, but also the least accurate way to calculate your DSO. The most accurate way to calculate your DSO is using the other method.

\n"},{"acf_fc_layout":"paragraph","content":"

The countback method: this method requires you to go back in time to find out how long it’s taken you to get paid (hence the name).

You start with your receivable balance and your gross sales from your company’s balance sheet. From there, you go back month-by-month:

\n"},{"acf_fc_layout":"bullet_list","items":[{"text":"

If your A/R is higher than your gross sales, you just add the number of days from the period to your DSO (which starts at 0).

"},{"text":"

If your A/R is lower than your gross sales, you calculate a day sales outstanding ratio. To do that, you need to divide your gross sales by your A/R. You then multiply this result by the number of days in your month (or period). This ratio gets added to your DSO.

"}]},{"acf_fc_layout":"paragraph","content":"

Once you’re done going back in time, you have your total days sales outstanding. You can find a step-by-step guide to calculating your DSO here (with examples).

\n"},{"acf_fc_layout":"paragraph","content":"

If you’re you having trouble calculating your DSO, check out our free spreadsheet to calculate, interpret and improve it!

\n"},{"acf_fc_layout":"paragraph","content":"

The best way to calculate your DSO and track it easily is to use a tool like Upflow! We use the most accurate method to compute it, as well as your latest data.

\n"},{"acf_fc_layout":"space_block"},{"acf_fc_layout":"heading","text":"Accounts Receivable Aging Report.","level":"h3"},{"acf_fc_layout":"space_block"},{"acf_fc_layout":"heading","text":"What is an Aging Report Analysis? ","level":"h4"},{"acf_fc_layout":"paragraph","content":"

An Aging Report is a visual representation of your pending invoices split into different categories, depending on their due date. They usually have: 0-30 days, 31 to 60 days, 61 to 90 days, and +90 days categories.

\n"},{"acf_fc_layout":"paragraph","content":"

At a glance, you can see which category is piling up and take the necessary action to prevent a cash crunch.

\n"},{"acf_fc_layout":"paragraph","content":"

Doing an aging report analysis means looking into each category and seeing where a problem is or may arise. It helps you prioritize your collectible efforts.

\n"},{"acf_fc_layout":"image","image":"https://cms.upflow.dev.3codes.io/wp-content/uploads/2022/06/aging-widget.png","caption":""},{"acf_fc_layout":"paragraph","content":"

For example, the +90 days category has a high risk of turning into uncollectible invoices (bad debts), so you can take action on this but also on the previous category. The 61 to 90 days bucket is the one to carefully watch, as it can indicate a future cash flow problem.

\n"},{"acf_fc_layout":"space_block"},{"acf_fc_layout":"heading","text":"How to Create a Receivable Aging Report?","level":"h4"},{"acf_fc_layout":"paragraph","content":"

To create your own receivable aging report, you’ll need to know your invoices’ due date, as well as the contact they were sent to. In theory, it’s pretty easy, as you simply have to allocate each invoice to the relevant time bracket category.

\n"},{"acf_fc_layout":"paragraph","content":"

Concretely, as a growing SaaS business, it would take you a lot of time to

\n"},{"acf_fc_layout":"ordered_list","items":[{"text":"List all the invoices you have pending;"},{"text":"

Manually move invoices from one category to another as time goes on.

"}]},{"acf_fc_layout":"paragraph","content":"

The best way to get a receivable aging report is therefore to use automated software that will do it for you. It might be a feature your billing or accounting software offers.

\n"},{"acf_fc_layout":"paragraph","content":"

You can also use a tool like Upflow of course: as a specialized A/R software, our tool is literally built for this! Our Analytics functionality allows you to follow the various A/R metrics you need to track.

\n"},{"acf_fc_layout":"space_block"},{"acf_fc_layout":"heading","text":"CEI Analysis. ","level":"h3"},{"acf_fc_layout":"space_block"},{"acf_fc_layout":"heading","text":"What is your Collection Index Effectiveness? ","level":"h4"},{"acf_fc_layout":"paragraph","content":"

Your Collection Index Effectiveness (or CEI) measures how much of your accounts receivable was indeed collected over a period of time. It’s a great metric to track alongside your DSO, which doesn’t take into account your payments due dates nor amounts.

\n"},{"acf_fc_layout":"paragraph","content":"

In other words, your CEI shows the effectiveness of your collection process over a collection period. It is a percentage, so you should aim at getting close to 100% – and always stay above 80%.

\n"},{"acf_fc_layout":"space_block"},{"acf_fc_layout":"heading","text":"SaaS: How to Calculate your CEI? ","level":"h4"},{"acf_fc_layout":"paragraph","content":"

Getting to your CEI manually can be tiresome. You need some information from your balance sheet to use the following formula:

\n"},{"acf_fc_layout":"color_block","content":"

CEI = Beginning Receivables + Monthly Credit Sales – Ending TotalReceivable) / Beginning Receivables + Monthly Credit Sales – Ending Current Receivable) * 100

\n"},{"acf_fc_layout":"paragraph","content":"

Alternatively, you can download our free spreadsheet CEI calculator.

\n"},{"acf_fc_layout":"space_block"},{"acf_fc_layout":"heading","text":"A/R Turnover Ratio Analysis.","level":"h3"},{"acf_fc_layout":"space_block"},{"acf_fc_layout":"heading","text":"What does Your Accounts Receivable Turnover Ratio say about your SaaS?","level":"h4"},{"acf_fc_layout":"paragraph","content":"

Your accounts receivable turnover ratio lets you know how well you collect money from your customers. It shows your average collection period for the credit you have extended to your customers.

\n"},{"acf_fc_layout":"paragraph","content":"

You want to get a high receivables turnover ratio as it suggests a good collection process. Your clients are paying quickly for the services you provide and your payment and receivables processes are efficient.

\n"},{"acf_fc_layout":"paragraph","content":"

In difficult economic times, however, you might want to consider settling for a lower turnover ratio. That means extending longer credit times, which can be useful to specific customers who are struggling financially. It’s a good way to keep your customers in time of crisis. Credit risks need to be pondered with the reality your SaaS is facing.

\n"},{"acf_fc_layout":"paragraph","content":""},{"acf_fc_layout":"heading","text":"How to Calculate Your Accounts Receivable Turnover Ratio.","level":"h4"},{"acf_fc_layout":"paragraph","content":"

To obtain your A/R turnover ratio, you need to do an average accounts receivable to net sales ratio over a period of time.

\n"},{"acf_fc_layout":"color_block","content":"

A/R Turnover Ratio = Average Accounts Receivable / Net Sales.

\n"},{"acf_fc_layout":"paragraph","content":"

From there, you can get your average collection period. Simply divide the number of days in the period you chose (365 days, 30 days, etc.) by your turnover ratio.

\n"},{"acf_fc_layout":"space_block"},{"acf_fc_layout":"heading","text":"The Best Way to Analyze Your Accounts Receivables.","level":"h2"},{"acf_fc_layout":"paragraph","content":"

Now we’ve seen what to analyze, let’s look into the best way to assess your A/R. Better A/R means better insights about your company, which means better financial forecasting.

\n"},{"acf_fc_layout":"paragraph","content":"

If you know that your DSO is a bit high for example, you can take action to lower it, which will in turn help you with your cash flow. In turn, it means more liquidity to dedicate to your long-term projects.

\n"},{"acf_fc_layout":"space_block"},{"acf_fc_layout":"heading","text":"Focus on Quality Data.","level":"h3"},{"acf_fc_layout":"paragraph","content":"

If you want to have high quality A/R analysis, you need high quality data. It sounds simple enough, but it can get complicated quickly.

\n"},{"acf_fc_layout":"space_block"},{"acf_fc_layout":"heading","text":"Make sure your data is up-to-date.","level":"h4"},{"acf_fc_layout":"paragraph","content":"

When you have hundreds (or thousands!) of clients and as many invoices to follow, getting a hold of qualitative data can turn into a full-time job.

\n"},{"acf_fc_layout":"paragraph","content":"

For one, this data needs to be accurate. There is little point in tracking KPIs that aren’t up to date. Making sure the data you use to make your decisions and create your financial reports is the latest one available is key. That ensures your actions are aligned with your strategic goals.

\n"},{"acf_fc_layout":"paragraph","content":"

To do that, you can establish one source of truth when it comes to your financial numbers. Spreadsheets are an option, but they don’t update automatically so they’re not the most efficient. Software on the other hand runs that for you in the background.

\n"},{"acf_fc_layout":"paragraph","content":"

Pick the software that, connected with all your finance tech stack, will centralize your latest data. Bonus point if said data is updated in real-time, and not just once or twice a day.

\n"},{"acf_fc_layout":"space_block"},{"acf_fc_layout":"heading","text":"Use the most accurate formulas.","level":"h4"},{"acf_fc_layout":"paragraph","content":"

You need to make sure the formulas used to calculate your KPIs are the most accurate ones. Like we saw with the DSO, there are usually several ways to compute the same metric.

\n"},{"acf_fc_layout":"paragraph","content":"

When it comes to financial numbers (and financial statements), we know that accuracy is quintessential. That’s why using softwares specialized in A/R ensures you have the right calculations and results. They also help streamline your whole process – more on that below.

\n"},{"acf_fc_layout":"space_block"},{"acf_fc_layout":"heading","text":"Optimize Your A/R Process.","level":"h3"},{"acf_fc_layout":"paragraph","content":"

The best way to analyze your A/R is to make sure your A/R process is efficient in the first place. If your receivable process is “up in the air”, with invoices floating around and no real workflow, it will be difficult to analyze your data and plan for your growth.

\n"},{"acf_fc_layout":"paragraph","content":"

One because your data wouldn’t be accurate, two because it’s difficult to plan without reliable processes. So if you want to make the best decisions, based on the best A/R analytics, you need to spend some time fine-tuning your process.

\n"},{"acf_fc_layout":"paragraph","content":"

Take a moment to think about your accounts receivable process at this point in time.

\n"},{"acf_fc_layout":"paragraph","content":"

Consider both aspects:

\n"},{"acf_fc_layout":"bullet_list","items":[{"text":"With your clients, from the moment an invoice is issued to the moment it’s paid (including follow-ups in case of late payment). "}]},{"acf_fc_layout":"bullet_list","items":[{"text":"Within your company, how you collaborate and stay on top of your A/R. "}]},{"acf_fc_layout":"paragraph","content":"

Now think about how you could make these processes more efficient. Here are a few pointers to get you started:

\n"},{"acf_fc_layout":"bullet_list","items":[{"text":"Make it a priority: if collecting your unpaid invoices is a priority for your company, it will become a priority for your clients, too. "}]},{"acf_fc_layout":"bullet_list","items":[{"text":"Map out processes and responsibilities: everyone should know what to do, who needs to do it and when to do it. Mapping out your receivable process (that means invoicing, payment and collection) will make a huge difference already."}]},{"acf_fc_layout":"bullet_list","items":[{"text":"

Set up reminders: schedule time to go over your A/R metrics, but also to decide on a few key actions for the period. Let your team know about your priorities and encourage them to block some time off for that, too.

"},{"text":"Allocate resources: you and your team need time and tools in order to optimize your A/R process. Luckily, using a software like Upflow will help you save time, so you can all focus on tasks that make a real difference."}]},{"acf_fc_layout":"bullet_list","items":[{"text":"Communicate with your sales team: they’re the ones selling, and you’re the ones collecting. Which means you get a lot of product feedback, and they get feedback on your payment terms and credit policies. Working more closely means making sure you’re all on the same page and offering better services to your clients. Which in turns, means more clients! Win-win-win. "}]},{"acf_fc_layout":"space_block"},{"acf_fc_layout":"heading","text":"Automate your A/R.","level":"h3"},{"acf_fc_layout":"space_block"},{"acf_fc_layout":"heading","text":"When Spreadsheets aren’t Enough. ","level":"h4"},{"acf_fc_layout":"paragraph","content":"

While it is impossible to work in Finance and not use Excel, they are not the end-all-be-all of this department. When it comes to calculating ever-moving data, and tracking financial KPIs, they simply don’t make the cut.

\n"},{"acf_fc_layout":"paragraph","content":"

Using spreadsheets requires switching between a lot of tabs, and chasing the right info everywhere. If you want more details about the CEI you just calculated for instance, you need to open at least a few other files to know what exactly went on during this period in time.

\n"},{"acf_fc_layout":"paragraph","content":"

In short, spreadsheets are a nightmare to keep updated, and require you to switch between different sources.

\n"},{"acf_fc_layout":"space_block"},{"acf_fc_layout":"heading","text":"Using Billing and Accounting Software for A/R Analysis. ","level":"h4"},{"acf_fc_layout":"paragraph","content":"

Billing and accounts software are essential, there is no debating that. They help you send invoices, receive payment, and track that everything is where it should be. And of course, make sure you provide state of the art financial statements.

\n"},{"acf_fc_layout":"paragraph","content":"

While they’re amazing for this job, they are not so good when it comes to accounts receivable. Some might offer a few analytics features, but none has a financial dashboard with the width and depth you need for your A/R metrics.

\n"},{"acf_fc_layout":"paragraph","content":"

Besides, they only display A/R information. They don’t let you do anything about it from their software, which means you’re back to juggling different tools to track one complete process.

\n"},{"acf_fc_layout":"space_block"},{"acf_fc_layout":"heading","text":"The Best Option for SaaS: A/R automation.","level":"h4"},{"acf_fc_layout":"paragraph","content":"

A/R software is the best thing you can do to optimize your receivable process. Not only is it the most efficient way to gather the information you need, but it frees up your time, too.

\n"},{"acf_fc_layout":"paragraph","content":"

Automating tasks that have low-value (like sending the same payment reminders emails) means more time to work on what really matters (like establishing a strategy for the invoices piling up in your aging report).

\n"},{"acf_fc_layout":"paragraph","content":"

Upflow has many features you can use that will make your life easier, and your company grow better:

\n"},{"acf_fc_layout":"bullet_list","items":[{"text":"Automatic email reminders: personalized to your recipients."},{"text":"Internal reminders for your team: always remember when to follow-up"},{"text":"Unlimited team members so you can include your sales team in the process"},{"text":"Analytics features to track your KPIs easily with a great level of details."},{"text":"Payment options: we offer various payment currencies, methods and terms depending on your business."}]},{"acf_fc_layout":"paragraph","content":"

All in all, Upflow makes it easy for you to be paid. It’s an integrated solution that helps you with all A/R related tasks, from payment to follow-up. It centralizes the data you need in real-time and offers financial forecasts you can use to make the best strategic decisions.

\n"},{"acf_fc_layout":"hubspot_cta","id":"8df0d460-70d0-40c2-bea0-b8236477d27a","alt":"cta request a demo"},{"acf_fc_layout":"space_block"},{"acf_fc_layout":"paragraph","content":"

Key Takeaways:

\n"},{"acf_fc_layout":"paragraph","content":""},{"acf_fc_layout":"bullet_list","items":[{"text":"

Your Accounts Receivable tell a story about your company. Are your clients happy? Are they paying on time? Is your business thriving?

"},{"text":"Monitoring your A/R is especially important if you’re a SaaS with a subscription-based business. Looking into the reality of when your clients pay you will make a big difference in your business’ future. "}]},{"acf_fc_layout":"bullet_list","items":[{"text":"We recommend tracking (at the very least) your DSO, CEI, Aging Report and Turnover ratio. They all highlight a different part of your collection process and, together, paint an accurate picture of your process as a whole. "}]},{"acf_fc_layout":"bullet_list","items":[{"text":"

The best way to analyze your A/R is to make sure you have quality data, as well as allocate resources to actually do the analysis. Only then can you begin to optimize your process.

"},{"text":"Reviewing your A/R process regularly ensures you get the best data to base your analysis on. You can then decide on priorities aligned and supportive of your business’ growth goals. "}]},{"acf_fc_layout":"bullet_list","items":[{"text":"Using specialized A/R software like Upflow helps you get the best analytics and accurately plan for your future growth. "}]}],"primary_category":{"term_id":374,"name":"AR metrics","slug":"ar-metrics","term_group":0,"term_taxonomy_id":97,"taxonomy":"category","description":"Tracking your receivable KPIs is crucial to mesure the efficiency of your cash collection. But which metric should you track? And how can you calculate and improve them? Have a look at our dedicated articles.","parent":0,"count":27,"filter":"raw"},"related_author_id":10617,"right_sidebar_call_to_action_id":"","right_sidebar_call_to_action_alt":"","date_modified":"29/07/2026","og_image":false,"og_title":"","og_description":"","canonical_mode":"auto","x_default_mode":"auto","_taxonomies":{"category":[{"id":374,"name":"AR metrics","slug":"ar-metrics","description":"Tracking your receivable KPIs is crucial to mesure the efficiency of your cash collection. But which metric should you track? And how can you calculate and improve them? Have a look at our dedicated articles.","parent":null},{"id":395,"name":"SaaS Finance","slug":"saas-finance","description":"SaaS businesses have specificities (different pricing ranges, subscription models, etc.) that can be overwhelming for their finance teams. Check out our latest articles on SaaS finance to bring your company to the next level!\n","parent":null}],"translation_priority":[{"id":11,"name":"Optional","slug":"optional","description":"","parent":null}]}},"publishedAt":"June 21, 2022","publishedAtIso":"2022-06-21T02:00:00Z","modifiedAtIso":"$undefined"},{"title":"CFOs: How to Best Track Your Accounts Receivable KPIs","description":"If you want to know what’s really going on in your business, you have to look at your data. Same goes for your A/R collection: if you want to know how well you perform, you have to look at specific KPIs. But how and where to track them?","image":"https://cms.upflow.dev.3codes.io/wp-content/uploads/2022/06/kpis-accounts-receivable.png","imageAlt":"","fields":{"link":"/blog/ar-metrics/kpis-accounts-receivable","_taxonomies":{"article_type":[{"id":374,"name":"AR metrics","slug":"ar-metrics","description":""}]},"author":{"name":"Alex Louisy","image":"https://cms.upflow.dev.3codes.io/wp-content/uploads/2026/07/7.png","description":"$64","position":"Co-founder and CEO of Upflow","slug":"alexandre"}},"acf":{"seo_title":"","seo_description":"","body":[{"acf_fc_layout":"paragraph","content":"

If you want to know what’s really going on in your business, you have to look at your data.

\n"},{"acf_fc_layout":"paragraph","content":"

The same goes for your accounts receivable collection: if you want to know how well you perform, you have to look at specific metrics.

\n"},{"acf_fc_layout":"paragraph","content":"

Knowing where you stand will help you know where to focus your team’s efforts. In the long run, tracking your AR metrics will help optimize your collections process (and have tangible proof of it).

\n"},{"acf_fc_layout":"paragraph","content":"

Overall, it ensures your cash flow management is optimal.

\n"},{"acf_fc_layout":"paragraph","content":"

Here are the essential KPIs you should be tracking:

\n"},{"acf_fc_layout":"bullet_list","items":[{"text":"Collection Effectiveness Index (CEI)"},{"text":"Best possible DSO "},{"text":"Average Day Delinquent (ADD)"},{"text":"Account receivable turnover ratio."},{"text":"Days Sales Outstanding (Having trouble calculating it? Check out our free spreadsheet!)"}]},{"acf_fc_layout":"paragraph","content":"

Learn more about the 5 Key Accounts Receivable Metrics to Assess Your AR Performance

\n"},{"acf_fc_layout":"paragraph","content":"

Today, let’s focus on how best to track these key performance indicators. With many key metrics to track and various methods to calculate each of them – it can get overwhelming. Especially if you do it all manually.

\n"},{"acf_fc_layout":"paragraph","content":"

Keep reading to find the best way to track your KPIs for accounts receivable!

\n"},{"acf_fc_layout":"paragraph","content":"

Spoiler alert: the best way involves using an automated solution like Upflow, our in-house software. Try out our Discover Plan for free!

\n"},{"acf_fc_layout":"hubspot_cta","id":"5dce7b06-14d0-4a82-a83c-2c25ba953ea2","alt":"discover analytics by upflow"},{"acf_fc_layout":"space_block"},{"acf_fc_layout":"heading","text":"The Problem with Tracking your Accounts Receivable KPIs Manually (Or Why Spreadsheets Aren’t Enough). ","level":"h2"},{"acf_fc_layout":"paragraph","content":"

Before we jump into the best way to track your accounts receivable metrics, let’s have a look at the other options, starting with using spreadsheets.

\n"},{"acf_fc_layout":"space_block"},{"acf_fc_layout":"heading","text":"Spreadsheets Results Aren’t Accurate","level":"h3"},{"acf_fc_layout":"paragraph","content":"

All Cfos and finance teams use a form of spreadsheets in their job – that’s a given. But while they are definitely valuable, they’re not always the best option.

\n"},{"acf_fc_layout":"paragraph","content":"

In fact, when it comes to tracking KPIs, using Excel can lead to inaccurate results.

\n"},{"acf_fc_layout":"paragraph","content":"

For one, there is the human factor. There is always the risk of a typo finding its way into a table or a formula. Sometimes it’s obvious and you have to spend time looking for the mistake. Sometimes it’s not, and you’re just basing your decisions on false information.

\n"},{"acf_fc_layout":"paragraph","content":"

To calculate your metrics, you need relevant data. For CEI measures for instance, you’ll need your:

\n"},{"acf_fc_layout":"bullet_list","items":[{"text":"Beginning receivables, "},{"text":"Monthly sales, "},{"text":"Total receivable at the end of the period, "},{"text":"Current receivables. "}]},{"acf_fc_layout":"paragraph","content":"

That’s a lot of data to chase after. Especially when it keeps changing!

\n"},{"acf_fc_layout":"paragraph","content":"

Switching between different software dashboards, bank accounts’, tabs, etc. doesn’t make the process easier. Especially as there is no guarantee this data is actually the latest available.

\n"},{"acf_fc_layout":"paragraph","content":"

If you want to have up-to-date results, you need up-to-date data. And using Excel doesn’t provide that. Most of the time, spreadsheets aren’t in real time. This means you need to manually update data to have an accurate report.

\n"},{"acf_fc_layout":"space_block"},{"acf_fc_layout":"heading","text":"Tracking Your KPIs Manually isn’t The Best Use of Your Time. ","level":"h3"},{"acf_fc_layout":"paragraph","content":"

Even if you do manage to find the most accurate data, using spreadsheets isn’t the best use of your time.

\n"},{"acf_fc_layout":"paragraph","content":"

Once the data chase is over (and is it really ever over?) – you still have to compute all of that manually. If you want to compare different time periods, you then have to start all over again. Producing graphs or reports takes some extra time, too.

\n"},{"acf_fc_layout":"paragraph","content":"

Let’s not even talk about doing a benchmark of all your performance metrics altogether – how much time would that take you?

\n"},{"acf_fc_layout":"paragraph","content":"

The bottom line is that spreadsheets don’t make it easy to calculate and track your KPIs for accounts receivable over time. All the necessary tasks take a lot of time out of your day.

\n"},{"acf_fc_layout":"paragraph","content":"

That’s time that’s not used to make decisions regarding your strategic long-term growth, or implementing said strategy.

\n"},{"acf_fc_layout":"paragraph","content":"

Automation and dedicated AR tools are the way to go if you want to track (and improve!) your collection performance.

\n"},{"acf_fc_layout":"space_block"},{"acf_fc_layout":"heading","text":"Tracking your AR Metrics with your Billing Tool. ","level":"h2"},{"acf_fc_layout":"paragraph","content":"

When it comes to choosing automation, you might want to use a tool you already use. Billing tools, or accounting software in general, often come with some kind of analytics features.

\n"},{"acf_fc_layout":"paragraph","content":"

While it makes sense to keep your finance stack lean to drive revenue expansion, it’s not the best option to track your KPIs for accounts receivable specifically.

\n"},{"acf_fc_layout":"paragraph","content":"

Billing tools and accounting software have the advantage of centralizing your data and, therefore, being your one source of truth.

\n"},{"acf_fc_layout":"paragraph","content":"

You know if an invoice is marked as paid, then the money is very likely in your bank account. If your software is operating in real-time (not synchronizing once or twice a day), it’s a bonus.

\n"},{"acf_fc_layout":"paragraph","content":"

However, billing software is often just that: billing software. It might have some metrics tracking functionality, but it’s not specialized in accounts receivable.

\n"},{"acf_fc_layout":"paragraph","content":"

It makes a huge difference when it comes to

\n"},{"acf_fc_layout":"bullet_list","items":[{"text":"The metrics they show, "},{"text":"The depth of features they offer,"},{"text":"The analysis you can draw from the data. "}]},{"acf_fc_layout":"paragraph","content":"

Because these solutions are by design incomplete for tracking KPIs for accounts receivable, you’d need to switch between different tools.

\n"},{"acf_fc_layout":"paragraph","content":"

Maybe your billing software shows your net credit sales, but your total credit sales will be found on your account software only. To compute them to get your sales ratio, you’d need to open a spreadsheet… And you’re back to juggling different tools to do one calculation.

\n"},{"acf_fc_layout":"paragraph","content":"

Put simply, nothing will ever do the job of an AR software – which is why you have AR software like Upflow in the first place. Those AR-focused tools offer all the features you need, not just the ones that are nice to have but don’t give you much depth.

\n"},{"acf_fc_layout":"paragraph","content":"

With AR automated software, you have the option to filter your reports, zoom in on some metrics, and actually set up reminders for your team to follow through on an invoice.

\n"},{"acf_fc_layout":"paragraph","content":"

Choose the AR software that best suits your current and future needs: for example, we offer real-time dashboards whereas other tools sync only once or twice a day.

\n"},{"acf_fc_layout":"paragraph","content":"

Need help tracking your main AR metrics? Have a look at our free spreadsheet!

\n"},{"acf_fc_layout":"hubspot_cta","id":"ab85080f-1635-4491-b739-2e6fb6f385b7","alt":"upload free spreadsheet"},{"acf_fc_layout":"space_block"},{"acf_fc_layout":"heading","text":"Building an Internal Tracking System for your AR Metrics.","level":"h2"},{"acf_fc_layout":"paragraph","content":"

Another option that is often considered by CFOs is to build their own tracking system. Instead of using someone else’s dashboards, they decide to create their own.

\n"},{"acf_fc_layout":"paragraph","content":"

It allows for more personalization as this new system can be 100% customized to their needs. It’s great in theory, but practically, it can quickly become nightmarish.

\n"},{"acf_fc_layout":"space_block"},{"acf_fc_layout":"heading","text":"It’s Difficult to Plan for your Future Needs.","level":"h3"},{"acf_fc_layout":"paragraph","content":"

To build your own AR tracking system, you first need to map out your exact needs during various meetings with your internal developer team (or hire this out). That in itself can be a challenge, especially as you don’t know how your needs will evolve.

\n"},{"acf_fc_layout":"paragraph","content":"

Maybe your company will merge with another entity, or maybe your core business activities will slightly vary.

\n"},{"acf_fc_layout":"paragraph","content":"

Any natural evolution of your business will need you to adapt your tracking system. That’s also true for all the documentation, FAQ, and training that your company’s employees will have to go through – possibly several times.

\n"},{"acf_fc_layout":"space_block"},{"acf_fc_layout":"heading","text":"It’s Not Time or Cost Efficient. ","level":"h3"},{"acf_fc_layout":"paragraph","content":"

By building their own system, managers think that they’ll be able to make all the decisions quickly.

\n"},{"acf_fc_layout":"paragraph","content":"

But the truth is that your project might not be a priority. That’s true whether you externalize this project or entrust it to your own developers. IT teams are pretty busy in general, so you’d have to rely on someone who’s constantly juggling tasks for your project.

\n"},{"acf_fc_layout":"paragraph","content":"

Once it’s done, you might need some extra features developed or bugs corrected in the future. That’ll be an additional waiting time, plus explaining your system all over again, and starting another operation.

\n"},{"acf_fc_layout":"paragraph","content":"

The time alone dedicated to project managing this would be better used elsewhere. You also need to consider the cost: direct if you hire out, or the opportunity cost of your team who could be working on another project.

\n"},{"acf_fc_layout":"paragraph","content":"

All in all, building your own tracking system takes time and energy that could be put elsewhere. It will take a lot of time and resources to build and most importantly, to maintain it.

\n"},{"acf_fc_layout":"space_block"},{"acf_fc_layout":"heading","text":"Building AR Automation Is Not Your Job.","level":"h3"},{"acf_fc_layout":"paragraph","content":"

In addition to having to manage this new system and its surrounding content, building your own dashboard means taking on a huge responsibility.

\n"},{"acf_fc_layout":"paragraph","content":"

If there is ever a problem (which, let’s be honest, tends to happen a lot in tech), you’d have to be the one solving it. Maybe it’s a problem with the servers, maybe your data doesn’t synchronize anymore. Whatever it is, it’ll be your IT team’s responsibility to find it and fix it.

\n"},{"acf_fc_layout":"paragraph","content":"

And while you do that… your team probably will have to convert back to using manual spreadsheets.

\n"},{"acf_fc_layout":"paragraph","content":"

It’s better (and more relaxing!) to outsource this part of your activity to professionals. People whose job it is to design AR automation, who you can rely on to fix any technical problem, answer your questions, and provide training to your collaborators.

\n"},{"acf_fc_layout":"paragraph","content":"

Your team’s job is finance and accounts receivable management. Ours is offering and maintaining a great A/R product.

\n"},{"acf_fc_layout":"space_block"},{"acf_fc_layout":"heading","text":"AR Software to Track Your AR Metrics: The Best Way to Go!","level":"h2"},{"acf_fc_layout":"space_block"},{"acf_fc_layout":"heading","text":"Benefits of Using an AR specialized tool to track your AR Metrics. ","level":"h3"},{"acf_fc_layout":"paragraph","content":"

Dedicated software is hands down the best option to track the KPIs for accounts receivable. It is the most efficient way to gather your data, analyze it, and actually do something about it.

\n"},{"acf_fc_layout":"paragraph","content":"

AR software are metric-centered. On Upflow for example, you can instantly access live reports that will show you how your cash collection is going. In a few clicks, you’ll access billing cohorts, DSO and aging balance. Below for example, you can see an example of Aging Balance on Upflow.

\n"},{"acf_fc_layout":"image","image":"https://cms.upflow.dev.3codes.io/wp-content/uploads/2022/06/aging-widget.png","caption":""},{"acf_fc_layout":"paragraph","content":"

The good news it, you can go further in your analysis. For example, if you click on you billing cohorts, you’ll be able to identify directly the accounts that are risk and take action. More numbers, more details and more accuracy.

\n"},{"acf_fc_layout":"paragraph","content":"

On top of tracking your main KPIs, you can also use AR software to prioritize and improve your collection efforts, thanks to the visibility provided by your KPI reports.

\n"},{"acf_fc_layout":"paragraph","content":"

What will come in handy is the ability to centralize your whole collection process on it.

\n"},{"acf_fc_layout":"paragraph","content":"

For example, Upflow integrates with your existing finance stack, meaning that your data from your other software will be automatically synchronized on it. That ensures that your results are always accurate and in real-time.

\n"},{"acf_fc_layout":"paragraph","content":"

You can also set up workflows to send automated payment reminders to your clients. Those can be used after their invoice due date, or even before. It’s all up to you, and the emails are entirely personalizable. You can also decide to use one of our email templates.

\n"},{"acf_fc_layout":"paragraph","content":"

By automating your most repetitive tasks (like calculating metrics or sending follow-up emails), you can focus on the actions that have a real added value.

\n"},{"acf_fc_layout":"paragraph","content":"

Maybe your metrics will indicate that you need to review your collection policies to prevent your unpaid invoices from turning into bad debt. Whatever it is, your whole team’s performance will increase. Making your accounts receivable process even more efficient at ensuring your company’s liquidity.

\n"},{"acf_fc_layout":"space_block"},{"acf_fc_layout":"heading","text":"Using Upflow for your AR Metrics. ","level":"h3"},{"acf_fc_layout":"paragraph","content":"

Using software also means less worrying about calculating your metrics, and more time spent analyzing said metrics. That’s key to improving your accounts receivable performance!

\n"},{"acf_fc_layout":"paragraph","content":"

Let’s have a look at some of the metrics you’ll find on Upflow Analytics, and why they matter:

\n"},{"acf_fc_layout":"heading","text":"Optimizing your Days Sales Outstanding (DSO) with Upflow or our free tool. ","level":"h3"},{"acf_fc_layout":"paragraph","content":"

Your DSO is the average number of days it takes you to get paid. It’s one of the most important KPIs for accounts receivable. A high DSO means your credit policies are too lenient, threatening your liquidity shortage. It has to be closely monitored over time.

\n"},{"acf_fc_layout":"paragraph","content":"

The main hurdle with DSO is to actually calculate it. You can use either the simple method or the countback method. The latter is more accurate but also more time-consuming.

\n"},{"acf_fc_layout":"paragraph","content":"

The good thing about using automation is that you don’t have to choose between effectiveness and accuracy. Upflow uses the most accurate formula to calculate your DSO, automatically. You can see what it looks like below.

\n"},{"acf_fc_layout":"image","image":"https://cms.upflow.dev.3codes.io/wp-content/uploads/2022/06/dso-widget-1.png","caption":""},{"acf_fc_layout":"paragraph","content":"

You’ll therefore be able to track your DSO over a time-period easily. Automation with Upflow makes it easy to focus on what’s most important: your company’s liquidity.

\n"},{"acf_fc_layout":"space_block"},{"acf_fc_layout":"heading","text":"Keeping an Eye on Your Aging Balance With Upflow.","level":"h4"},{"acf_fc_layout":"paragraph","content":"

Your aging balance is a visual representation of your unpaid invoices, split into different buckets:

\n"},{"acf_fc_layout":"bullet_list","items":[{"text":"0 to 30 days overdue,"},{"text":"30 to 60 days overdue,"},{"text":"60 to 90 days overdue, "},{"text":"+90 days overdue. "}]},{"acf_fc_layout":"paragraph","content":"

At a glance, you can see in which bucket your invoices are piling up in. It gives you an immediate sense of where to focus your collection efforts.

\n"},{"acf_fc_layout":"paragraph","content":"

We recommend focusing on the 60-90 days category to prevent any future liquidity problems. Aging balances are helpful to help you prioritize so you can better manage your cash flow.

\n"},{"acf_fc_layout":"paragraph","content":"

By letting an A/R software like Upflow create this visual representation of your invoices for you, you can focus your energy on sending payment reminders to your past-due clients.

\n"},{"acf_fc_layout":"paragraph","content":"

You could even automate this by setting up a specific email workflow for late payers:

\n"},{"acf_fc_layout":"bullet_list","items":[{"text":"You can set it up as a subgroup and have emails sent automatically before their due date and/or"},{"text":"You can send one or a series of automated emails right now to customers with unpaid invoices. "}]},{"acf_fc_layout":"paragraph","content":"

Once you’ve freed yourself from having to track your KPIs for accounts receivable, you can actually act on them and course correct immediately.

\n"},{"acf_fc_layout":"space_block"},{"acf_fc_layout":"heading","text":"Creating Billing Cohorts Easily With Upflow. ","level":"h4"},{"acf_fc_layout":"paragraph","content":"

A billing cohort is a super-tool that ties all your accounts receivable processes together. It allows you to track invoices sent together (in the same billing cohort) over time. See an example from our product below.

\n"},{"acf_fc_layout":"image","image":"https://cms.upflow.dev.3codes.io/wp-content/uploads/2022/06/billing-cohorts-widget.png","caption":""},{"acf_fc_layout":"paragraph","content":"

You can read the graph both ways to get an accurate picture of your A/R:

\n"},{"acf_fc_layout":"bullet_list","items":[{"text":"Horizontally: see how fast your invoices are collected."},{"text":"Vertically: see how your collection improves with time."}]},{"acf_fc_layout":"paragraph","content":"

It’s a handy feature to have as it gives you an overview of your whole collection process.

\n"},{"acf_fc_layout":"paragraph","content":"

On Upflow, you have access to it on your dashboard. You can also click on each billing cohort to see which accounts are currently overdue. Once more, time not spent on tracking metrics manually is time you can spend on actually improving your collection.

\n"},{"acf_fc_layout":"paragraph","content":"

These are just a few of the things you can track (and do) with Upflow. Imagine what you could do with all the time it frees you! Try out our free tool to get an idea.

\n"},{"acf_fc_layout":"hubspot_cta","id":"5dce7b06-14d0-4a82-a83c-2c25ba953ea2","alt":"discover analytics by upflow"},{"acf_fc_layout":"space_block"},{"acf_fc_layout":"paragraph","content":"

Key Takeaways:

\n"},{"acf_fc_layout":"bullet_list","items":[{"text":"While Excel spreadsheets have their uses, they are limited when it comes to tracking your accounts receivable metrics. The manual process is error-prone, inaccurate, and time-consuming. "}]},{"acf_fc_layout":"bullet_list","items":[{"text":"

Using your billing software analytic features doesn’t give you the depth you need to optimize your AR metrics. They are not designed for accounts receivable collection and are therefore limited in how they can help you.

"},{"text":"

Switching between different tools to access different AR metrics is tempting, but ultimately it is a make-shift solution that isn’t efficient.

"},{"text":"

Building your own AR dashboards is both time and cost-consuming. It also means taking on a huge technical responsibility (which isn’t your job). While the customization looks good on paper, it doesn’t stand the test of time, as your business needs will evolve.

"},{"text":"The best way to monitor your AR KPIs is to use automated AR software. They’ll do the calculation and tracking for you, while also offering you relevant features to optimize your AR process."}]}],"primary_category":{"term_id":374,"name":"AR metrics","slug":"ar-metrics","term_group":0,"term_taxonomy_id":97,"taxonomy":"category","description":"Tracking your receivable KPIs is crucial to mesure the efficiency of your cash collection. But which metric should you track? And how can you calculate and improve them? Have a look at our dedicated articles.","parent":0,"count":27,"filter":"raw"},"related_author_id":10619,"right_sidebar_call_to_action_id":"","right_sidebar_call_to_action_alt":"","date_modified":"29/07/2026","og_image":false,"og_title":"","og_description":"","canonical_mode":"auto","x_default_mode":"auto","_taxonomies":{"category":[{"id":374,"name":"AR metrics","slug":"ar-metrics","description":"Tracking your receivable KPIs is crucial to mesure the efficiency of your cash collection. But which metric should you track? And how can you calculate and improve them? Have a look at our dedicated articles.","parent":null}],"translation_priority":[{"id":11,"name":"Optional","slug":"optional","description":"","parent":null}]}},"publishedAt":"June 2, 2022","publishedAtIso":"2022-06-02T02:00:00Z","modifiedAtIso":"$undefined"},{"title":"What is The Most Effective Way to Improve your DSO and Cash Flow?","description":"Your DSO is a crucial financial ratio to track. Reducing your DSO should be a priority in any business. By doing so, you’ll reduce your risks of running into cash flow problems. Find out why automation is the best way to improve it!","image":"https://cms.upflow.dev.3codes.io/wp-content/uploads/2022/05/improve-dso.png","imageAlt":"","fields":{"link":"/blog/reduce-dso/improve-dso","_taxonomies":{"article_type":[{"id":374,"name":"AR metrics","slug":"ar-metrics","description":""}]},"author":{"name":"Alexandre Antoine","image":"https://cms.upflow.dev.3codes.io/wp-content/uploads/2026/07/9-1.png","description":"

\n","position":"Finance Director at Upflow","slug":"alex-finance-director"}},"acf":{"seo_title":"What is The Most Effective Way to Improve your DSO and Cash Flow?","seo_description":"A low DSO is good. A high DSO, on the other hand, means bad news. Because you don’t have much cash inflow, it can threaten your company’s liquidity. Keep reading to find out why automation is the best ways to improve your DSO!","body":[{"acf_fc_layout":"paragraph","content":"

Your Days Sales Outstanding (DSO) is a crucial financial ratio to track. Put simply, it is the number of days it takes your clients to pay your invoices.

\n"},{"acf_fc_layout":"paragraph","content":"

Your DSO calculation comes from a ratio between your sales and your A/R. You can read more about the most accurate formula to calculate your dso here or check out our free spreadsheet to calculate, interpret and improve it!

\n"},{"acf_fc_layout":"paragraph","content":"

A low DSO is good, as it suggests a fast credit sales to payment turnaround. A high DSO, on the other hand, means bad news. Because you don’t have much cash inflow, it can threaten your company’s liquidity.

\n"},{"acf_fc_layout":"paragraph","content":"

Reducing your DSO should therefore be a priority in any business. By doing so, you’ll reduce your risks of running into cash flow problems.

\n"},{"acf_fc_layout":"paragraph","content":"

Keep reading to find out the best ways to improve your DSO.

\n"},{"acf_fc_layout":"paragraph","content":"

At Upflow, we believe it’s all about automation! Our in-house A/R software can help you lower your DSO efficiently by automating your collection process and help you get paid faster.

\n"},{"acf_fc_layout":"hubspot_cta","id":"5dce7b06-14d0-4a82-a83c-2c25ba953ea2","alt":"analytics platform"},{"acf_fc_layout":"space_block"},{"acf_fc_layout":"paragraph","content":""},{"acf_fc_layout":"heading","text":"What Impact Does Your DSO Have on Your Cash Flow?","level":"h2"},{"acf_fc_layout":"paragraph","content":"

Before jumping into ways to improve your days sales outstanding, let’s take a moment to really understand why it’s important.

\n"},{"acf_fc_layout":"paragraph","content":"

Let’s consider a situation where your DSO is high – that is, higher than your industry’s standard payment terms.

\n"},{"acf_fc_layout":"paragraph","content":"

Concretely, your clients take too much time to pay you. It is a problem because it directly impacts your cash flow, as it’s money you don’t have yet.

\n"},{"acf_fc_layout":"paragraph","content":"

Since you don’t have it, you cannot use the cash to pay your providers on time, which can lead to late payment fees for you. When unpaid invoices and accounts payable pile up, it creates an unbalance that can threaten your company’s viability.

\n"},{"acf_fc_layout":"paragraph","content":"

A high DSO reduces your working capital, which means less cash for your expenses, debt repayments, and investments. Ultimately, it can lead to bankruptcy.

\n"},{"acf_fc_layout":"paragraph","content":"

What you’re doing is basically giving free customer credits, with no interest to compensate for your credit risk. Because there is a risk that your unpaid invoices remain unpaid forever, especially since you don’t give credit approvals. After all, that’s why your A/R are a liability.

\n"},{"acf_fc_layout":"paragraph","content":"

On the other hand, a lower DSO means improved liquidity and leads to better cash flow management, as you know you can expect prompt payments. It’s also a mark of customer satisfaction since happy customers tend to pay their invoices within the given amount of time.

\n"},{"acf_fc_layout":"paragraph","content":"

If a lower DSO sounds good to you: keep reading! Next, we’re giving you concrete tips to start improving your DSO today.

\n"},{"acf_fc_layout":"paragraph","content":"

Need help calculating your DSO? Check out our free metric spreadsheet.

\n"},{"acf_fc_layout":"hubspot_cta","id":"45d64f0e-66b1-4cea-8d72-f2fec1726ceb","alt":"free ar metric spreadsheet"},{"acf_fc_layout":"paragraph","content":""},{"acf_fc_layout":"heading","text":"5 Ways to Start Improving Your DSO and Cash Flow Right Away.","level":"h2"},{"acf_fc_layout":"paragraph","content":"

The main idea about reducing your DSO is simple: you need to streamline your payment and invoicing process.

\n"},{"acf_fc_layout":"paragraph","content":"

Because we’re talking about customers’ payment time here, it makes sense to look at what your current collection processes are:

\n"},{"acf_fc_layout":"paragraph","content":"

Do you make it easy for your customers to pay you?

\n"},{"acf_fc_layout":"paragraph","content":"

Do you have an established strategy to stay on top of your collection?

\n"},{"acf_fc_layout":"paragraph","content":"

Do you know what other KPIs influence your DSO?

\n"},{"acf_fc_layout":"paragraph","content":"

If you can’t answer yes to the above (or you’re not sure): don’t worry. We’re about to give you the details on how exactly to do that.

\n"},{"acf_fc_layout":"paragraph","content":""},{"acf_fc_layout":"heading","text":"Be Proactive about your Accounts Receivable Collection to Lower your DSO.","level":"h3"},{"acf_fc_layout":"paragraph","content":"

Staying on top of your A/R collection process is the number one way to improve your DSO. By making it a priority for you, your team, and even your whole company, you make it a priority for your customers, too.

\n"},{"acf_fc_layout":"paragraph","content":"

Since consistency is key here, we suggest you set up reminders for your whole team to follow through on your invoices. That entails sending invoices on time, but also follow-up emails, etc. (We’ll see more about this after.)

\n"},{"acf_fc_layout":"paragraph","content":"

If that sounds like a lot, remember that you can use automation to take some of the burden off your team (especially the repetitive ones!). An A/R software like Upflow allows you to set up different reminders for your team, and offers a space to centralize all the follow-through notes on a case.

\n"},{"acf_fc_layout":"paragraph","content":"

With a tool like this, you can easily involve more people in the collection process, something we highly recommend.

\n"},{"acf_fc_layout":"paragraph","content":"

Your sales team for example should focus less on net sales and more on cash payments, which actually influences your company’s cash flow positively. You can also involve your accounts managers in the process by asking them to send an email to their contact when an invoice is unpaid.

\n"},{"acf_fc_layout":"paragraph","content":"

At Upflow for instance, we ask our sales representatives to collect the first invoice with new customers. It ensures that the payment is really collected and makes for a smooth transition with our accounting department. If any dispute arises, it can also be easily cleared up.

\n"},{"acf_fc_layout":"paragraph","content":"

Is your DSO high and your late payments piling-up? Have a look at our free guide with tips to get paid on time!

\n"},{"acf_fc_layout":"space_block"},{"acf_fc_layout":"hubspot_cta","id":"60129848-c9b6-4924-9af4-9f5af5bcc8e1","alt":"download white paper"},{"acf_fc_layout":"space_block"},{"acf_fc_layout":"paragraph","content":""},{"acf_fc_layout":"heading","text":"Optimize Your Billing Processes to Improve Cash Flow.","level":"h3"},{"acf_fc_layout":"paragraph","content":"

Your billing process is a key element to lowering your DSO and improving your cash flow. Making sure that your clients receive the right information at the right time is essential to get paid on time.

\n"},{"acf_fc_layout":"paragraph","content":"

Here is the information that must be on your invoices and payment reminders:

\n"},{"acf_fc_layout":"bullet_list","items":[{"text":"Invoice number, "},{"text":"invoice amount, and eventual late payments fees,"},{"text":"Invoice due date (you can also highlight the x number of days it has been due),"},{"text":"Your company’s name and your contact info, "},{"text":"Your payment terms,"},{"text":"Your payment options."}]},{"acf_fc_layout":"paragraph","content":"

It might seem obvious, but too often, invoices are sent without this information and cannot be paid or tracked down properly.

\n"},{"acf_fc_layout":"paragraph","content":"

Multiple payment options are also encouraged. Make sure you include specific instructions for each i.e. payment via credit cards, bank transfers, international transfers, etc.

\n"},{"acf_fc_layout":"paragraph","content":"

When using Upflow, your customers have access to a specific portal that offers different payment options to choose from.

\n"},{"acf_fc_layout":"paragraph","content":"

The easier you make it for your clients to pay you, the more likely they are to pay you on time.

\n"},{"acf_fc_layout":"space_block"},{"acf_fc_layout":"heading","text":"Establish A Payment Reminder Strategy.","level":"h3"},{"acf_fc_layout":"paragraph","content":"

Another important piece of the puzzle is to send timely payment reminders to your clients. It is in line with the concept of making it easier for them, and it benefits you, too. Win-win.

\n"},{"acf_fc_layout":"paragraph","content":"

Depending on your payment terms, you can draw up a payment reminder calendar that looks more or less like this:

\n"},{"acf_fc_layout":"paragraph","content":"

Each time, increase the assertiveness of your tone – but always remain polite.

\n"},{"acf_fc_layout":"paragraph","content":"

We also recommend you switch between different mediums and contact points. For instance, if your emails are left unanswered, you can pick up the phone and ensure they have been received.

\n"},{"acf_fc_layout":"paragraph","content":"

That’s also when you’d ask a sales representative to check on their contact and make sure all is well.

\n"},{"acf_fc_layout":"paragraph","content":"

If you want to be more effective, you can even design different email workflows depending on the different client subgroups you have:

\n"},{"acf_fc_layout":"bullet_list","items":[{"text":"Corporate / SMBs,"},{"text":"Pay by card / by transfer / by heck,"},{"text":"New customers / Established clients"},{"text":"First time late payers / recurring late payers"},{"text":"Etc. "}]},{"acf_fc_layout":"paragraph","content":"

On Upflow, you can set up these different scenario quickly and let them run in the background. Automation for the win!

\n"},{"acf_fc_layout":"paragraph","content":"

Check out The Complete Guide for Payment Reminders for Your B2B Business to learn more.

\n"},{"acf_fc_layout":"paragraph","content":""},{"acf_fc_layout":"heading","text":"Review Your Payment Terms to Reduce DSO.","level":"h3"},{"acf_fc_layout":"paragraph","content":"

What’s a good DSO? First, there are benchmarks where you can find the average dso per industry. Second: that’s all relative.

\n"},{"acf_fc_layout":"bullet_list","items":[{"text":" If you have a 30-days payment term, then a DSO at 30 days (or close to) is great. "}]},{"acf_fc_layout":"bullet_list","items":[{"text":"If you ask for immediate payment and your DSO is at 30 on the other hand, that’s not as good. In this case, you want your DSO to be as close to 0 as possible.
"}]},{"acf_fc_layout":"paragraph","content":"

In brief, a good DSO is one that’s close to your payment terms. Therefore to lower it, you need to have a look at your current payment and credit terms, but also your payment options.

\n"},{"acf_fc_layout":"paragraph","content":"

Look at your current credit policy. If you have a 90-days interest-free payment but your DSO is higher than what you’d like, you might want to review it. Payment flexibility might be appreciated by your customers, but it shouldn’t threaten your company’s cash flow.

\n"},{"acf_fc_layout":"paragraph","content":"

If you’re not sure about what’s best for your clients, ask! Different clients can have different terms which can be negotiated on a case-by-case basis.

\n"},{"acf_fc_layout":"paragraph","content":"

Another way to reduce your DSO is to incentivize early payment. By offering incentives, you encourage your clients to pay sooner rather than later. Payment discounts are a great way to encourage upfront payments for example.

\n"},{"acf_fc_layout":"paragraph","content":"

On the other side of the spectrum, you have late payers. For some of them, payments arrive late because they forget. That’s why a reminder is always handy.

\n"},{"acf_fc_layout":"paragraph","content":"

You can also encourage them to automate their payment – that’s especially relevant if you have a subscription-based business.

\n"},{"acf_fc_layout":"paragraph","content":"

For others, it might be because they have cash flow problems. Offering them a payment plan would be helpful for them and for you. When it comes to unpaid invoices, the hardest part is to find the root of the problem. Once you’ve figured it out, you can find solutions that satisfy each party.

\n"},{"acf_fc_layout":"paragraph","content":"

Which is why, once more, being proactive about your A/R is a game changer. By sending automated and personalized emails, you ensure that there is always a clear channel of communication between you and your customers.

\n"},{"acf_fc_layout":"space_block"},{"acf_fc_layout":"heading","text":"See Beyond Your Days Sales Outstanding.","level":"h3"},{"acf_fc_layout":"paragraph","content":"

There is more to your accounts receivable’s health than your DSO. While it’s a great metric that needs to be monitored, it’s not the end-all-be-all of your company’s cash flow.

\n"},{"acf_fc_layout":"paragraph","content":"

For one, your DSO attributes the same weight to all your invoices. You might collect from your smaller clients quickly, but your bigger accounts might take more time (which would indicate that you need to review your payment terms with them.)

\n"},{"acf_fc_layout":"paragraph","content":"

In order to get an accurate representation of your collection process, you need more KPIs, such as

\n"},{"acf_fc_layout":"bullet_list","items":[{"text":"

Your Collection Effectiveness Index (CEI): it measures in percentage your ability to get paid over a given period (usually a month). You want this to be as close to 100% as possible, and always above 80%.

Your CEI is an internal measure of your collection effectiveness. While your DSO calculates the average number of days it takes to get paid, your CEI takes into account the amount of the unpaid invoices.

"},{"text":"

Your A/R aging reports: a visual representation of your unpaid invoices that shows you when your invoices are due, in different time brackets. You can have a 0-30 days bracket, 30-60 days one, and a +60 days. We recommend focusing on reducing the second one specifically, as it indicates a rising cash collection problem.

"},{"text":"Your billing cohorts: an overview metric to see how well your company collects cash over time. It’s good to monitor it over time to see how your collection processes evolve. "}]},{"acf_fc_layout":"paragraph","content":"

These KPIs calculation can easily be automated using – you guessed it! – accounts receivable software. Upflow offers a private dashboard with these metrics (and more) which you can consult in a few clicks. Since we integrate with third party apps like your billing software, you also know that your data is always up-to-date.

\n"},{"acf_fc_layout":"paragraph","content":"

Check out our article on the 9 Key Financial Metrics You Should Track.

\n"},{"acf_fc_layout":"paragraph","content":"

We’ve seen some of the ways you can start improving your DSO. Before you get overwhelmed with everything there is to do, let’s see the most effective way you can lower your DSO. It all falls down to one word: automation.

\n"},{"acf_fc_layout":"space_block"},{"acf_fc_layout":"heading","text":"The Best Way to Lower Your DSO: Automating Your A/R.","level":"h2"},{"acf_fc_layout":"paragraph","content":"

If you feel like the tasks to lower your DSO are a lot, you are right.

\n"},{"acf_fc_layout":"paragraph","content":"

In between following up with individual clients, tracking KPIs, and optimizing your processes, there is little time for anything else, let alone for long-term strategic thinking.

\n"},{"acf_fc_layout":"paragraph","content":"

The good news is that automation can help you. By automating your most time-consuming tasks, A/R software frees up your time for tasks with higher added value. Less copying and pasting the same email, more strategy!

\n"},{"acf_fc_layout":"paragraph","content":"

With Upflow, you can send automated payment reminders to your clients. You can design different workflows, write the email once (or use one of our templates) and voilà! It’s all set up to work in the background.

\n"},{"acf_fc_layout":"paragraph","content":"

Automating doesn’t mean being generic: you can personalize your emails to your clients through our interface.

\n"},{"acf_fc_layout":"paragraph","content":"

When it comes to tracking your DSO metrics, an A/R tool will generally show you a dashboard with several KPIs which are automatically calculated. You can easily track your DSO, CEI, and other important collection metrics on it, and even customize your reports.

\n"},{"acf_fc_layout":"paragraph","content":"

It’s also less error-prone as it’s done automatically and all in one place. Upflow integrates with your CRM, billing software, and other third-party apps, which provides you with the latest data at all times.

\n"},{"acf_fc_layout":"paragraph","content":"

Last but not least, using an online tool also means facilitating collaboration at the scale of your team and your company.

\n"},{"acf_fc_layout":"paragraph","content":"

You can set up internal reminders and attribute tasks to other team members. It’s ideal to know who is working on which account and make sure everyone is taken care of. Since you can have an unlimited number of access, you can even invite your sales team.

\n"},{"acf_fc_layout":"paragraph","content":"

By automating your collection workflows, A/R software like Upflow will make your whole process more efficient. It means getting faster payments, improving your cash flow, and having more time to dedicate to your long term growth – every CFO’s dream.

\n"},{"acf_fc_layout":"paragraph","content":"

Want to give Upflow a try? Try our free Discover Plan.

\n"},{"acf_fc_layout":"hubspot_cta","id":"5dce7b06-14d0-4a82-a83c-2c25ba953ea2","alt":"call to action analytics"},{"acf_fc_layout":"space_block"},{"acf_fc_layout":"paragraph","content":"

Key Takeaways:

\n"},{"acf_fc_layout":"bullet_list","items":[{"text":"

Your DSO can make or break your business. Where a low DSO means great liquidity, a high DSO can endanger your company’s cash flow and sustainability.

"},{"text":"To reduce your DSO, you need to look at your collection process as a whole. You want your invoicing and billing processes to make it easy for your clients to pay you "}]},{"acf_fc_layout":"bullet_list","items":[{"text":"

Setting up various payment reminder workflows will help reduce your DSO. Make it a priority for you and it will become a priority for your clients.

"},{"text":"If your DSO is too high, look at your payment and credit terms. Changing those will have a huge impact on how fast you get paid. "}]},{"acf_fc_layout":"paragraph","content":""},{"acf_fc_layout":"bullet_list","items":[{"text":"

While DSO metrics are great to track, you should also keep an eye on your CEI, aging report, and billing cohort.

"},{"text":"The best way to reduce your DSO is through automation. By letting software do the heavy lifting, you can focus on the accounts that really deserve your attention as a CFO. It’s also more time for strategy! "}]},{"acf_fc_layout":"heading","text":"FAQs","level":"h2"},{"acf_fc_layout":"article_faq","items":[{"question":"What impact does your DSO have on your cash flow?","answer":"

A high Days Sales Outstanding (DSO) negatively impacts cash flow by delaying payments, which can prevent you from paying your own bills on time, leading to late fees and unbalanced accounts. This reduces working capital, affecting your ability to cover expenses, debt repayments, and make investments. A lower DSO improves liquidity and enables better cash flow management, as you can rely on prompt payments. Additionally, a lower DSO is often a sign of satisfied customers who pay on time.

\n"}]}],"primary_category":{"term_id":393,"name":"Reduce DSO","slug":"reduce-dso","term_group":0,"term_taxonomy_id":116,"taxonomy":"category","description":"DSO is a crucial metric to track: it indicates how long it takes you to get paid by your clients. The closer it is to your payment terms, the better. Here you'll find articles and resources to help you reduce your DSO and get your business on the right track.","parent":0,"count":9,"filter":"raw"},"related_author_id":10617,"right_sidebar_call_to_action_id":"","right_sidebar_call_to_action_alt":"","date_modified":"29/07/2026","og_image":false,"og_title":"","og_description":"","canonical_mode":"auto","x_default_mode":"auto","_taxonomies":{"category":[{"id":374,"name":"AR metrics","slug":"ar-metrics","description":"Tracking your receivable KPIs is crucial to mesure the efficiency of your cash collection. But which metric should you track? And how can you calculate and improve them? Have a look at our dedicated articles.","parent":null},{"id":393,"name":"Reduce DSO","slug":"reduce-dso","description":"DSO is a crucial metric to track: it indicates how long it takes you to get paid by your clients. The closer it is to your payment terms, the better. Here you'll find articles and resources to help you reduce your DSO and get your business on the right track.","parent":null}],"translation_priority":[{"id":11,"name":"Optional","slug":"optional","description":"","parent":null}]}},"publishedAt":"May 18, 2022","publishedAtIso":"2022-05-18T02:00:00Z","modifiedAtIso":"$undefined"},{"title":"7 Things to Know About Your Days Sales Outstanding","description":"Tracking Accounts Receivable metrics is essential and allows you to monitor your cash flow better. One of the essential KPI is your Days Sales Outstanding. Read on to learn more about your DSO!","image":"https://cms.upflow.dev.3codes.io/wp-content/uploads/2022/05/days-sales-outstanding.png","imageAlt":"","fields":{"link":"/blog/reduce-dso/days-sales-outstanding","_taxonomies":{"article_type":[{"id":374,"name":"AR metrics","slug":"ar-metrics","description":""}]},"author":{"name":"Alexandre Antoine","image":"https://cms.upflow.dev.3codes.io/wp-content/uploads/2026/07/9-1.png","description":"

\n","position":"Finance Director at Upflow","slug":"alex-finance-director"}},"acf":{"seo_title":"7 Things to Know About Your Days Sales Outstanding","seo_description":"It's crucial to track A/R metrics from the start. Your DSO for example will tell you how long it takes you to get paid and identify risky accounts. But what is DSO and how can you improve it?","body":[{"acf_fc_layout":"paragraph","content":"

Tracking Accounts Receivable metrics is essential to your business. Indeed, it allows you to monitor your cash collection process and manage your cash flow better. It also helps you mitigate the risks of the inevitable late-paying accounts. In short, keeping track of essential KPIs helps you plan for your business growth.

\n"},{"acf_fc_layout":"paragraph","content":"

One of the essential KPI to follow from the start is your DSO – for Days Sales Outstanding. Simply put, your DSO is the number of days it takes for your business to get paid.

\n"},{"acf_fc_layout":"paragraph","content":"

What exactly is DSO?

\n"},{"acf_fc_layout":"paragraph","content":"

Which ways can you calculate it?

\n"},{"acf_fc_layout":"paragraph","content":"

What does an ideal DSO look like?

\n"},{"acf_fc_layout":"paragraph","content":"

Keep reading to learn the 7 things you need to know about your Days Sales Outstanding.

\n"},{"acf_fc_layout":"paragraph","content":"

With Upflow, you can get live and direct access to your DSO through your dashboard. Our in-house software helps you automate your A/R collection process and gives you your real-time KPIs, so you can focus on your long-term strategy. Give it a try with our free Discover Plan!

\n"},{"acf_fc_layout":"hubspot_cta","id":"5dce7b06-14d0-4a82-a83c-2c25ba953ea2","alt":"Analytics by Upflow"},{"acf_fc_layout":"space_block"},{"acf_fc_layout":"paragraph","content":""},{"acf_fc_layout":"heading","text":" 1. What is Days Sales Outstanding?","level":"h2"},{"acf_fc_layout":"paragraph","content":"

Days Sales Outstanding is the time it takes you to get paid by your customers, counted in days.

\n"},{"acf_fc_layout":"paragraph","content":"

Concretely, it is the number of days between your invoice being issued and your invoice getting paid – ie when your company’s accounts receive the credit sales from your customers.

\n"},{"acf_fc_layout":"paragraph","content":"

Your DSO is a key metric in your cash conversion cycle, alongside other important KPIs to track in your B2B business.

\n"},{"acf_fc_layout":"space_block"},{"acf_fc_layout":"heading","text":" 2. Why is DSO Important for Your Accounts Receivable?","level":"h2"},{"acf_fc_layout":"paragraph","content":"

Your DSO is an important financial ratio to track as it’s a good indicator of your company’s cash flow. By knowing your average collection period, you’ll be able to plan how much cash flow you can expect at a given time.

\n"},{"acf_fc_layout":"paragraph","content":"

It also tells you how efficient your collection process and payment terms are, which is key for optimizing your overall accounts receivable process.

\n"},{"acf_fc_layout":"paragraph","content":"

Your DSO, combined with your turnover ratio (calculated from your net credit sales), also tell you how well you can turn your accounts receivable into cash over a given time period.

\n"},{"acf_fc_layout":"paragraph","content":"

Your DSO and receivable turnover ratio are complementary KPIs. Looking at both allows you to understand how well your cash collection process is operating based on 2 fundamental things:

\n"},{"acf_fc_layout":"bullet_list","items":[{"text":"the number of days it takes to collect revenue from the sale, "},{"text":"the efficiency of your process comparing your net sales and your A/R."}]},{"acf_fc_layout":"paragraph","content":"

As it heavily influences your working capital, your DSO can make or break your business. When it’s low, it’s a sign that your conversion from invoicing to cash sales goes smoothly. When it’s high, it’s a warning sign of poor collections processes and needs to be addressed ASAP.

\n"},{"acf_fc_layout":"paragraph","content":"

Need help calculating your main A/R metrics? Have a look at our free spreadsheet.

\n"},{"acf_fc_layout":"hubspot_cta","id":"ab85080f-1635-4491-b739-2e6fb6f385b7","alt":"AR metrics spreadsheet"},{"acf_fc_layout":"space_block"},{"acf_fc_layout":"paragraph","content":""},{"acf_fc_layout":"heading","text":"3. How Do You Calculate Your DSO? ","level":"h2"},{"acf_fc_layout":"paragraph","content":"

Need help calculating your DSO? Have a look at our free spreadsheet that calculates, interprets and helps you improve it!

\n"},{"acf_fc_layout":"paragraph","content":"

There are two different ways to calculate your days sales outstanding: the simple method and the countback method.

\n"},{"acf_fc_layout":"paragraph","content":"

Both require your balance sheet numbers like your accounts receivable and gross sales, so get those ready!

\n"},{"acf_fc_layout":"heading","text":"Days Sales Outstanding Formula: the Simple Method.","level":"h3"},{"acf_fc_layout":"paragraph","content":"

Let’s start with the simple one: as its name indicates, it is the most straightforward to use.

\n"},{"acf_fc_layout":"paragraph","content":"

For this, you’ll need your gross revenues and your accounts receivable at the end of the period you want to calculate.

\n"},{"acf_fc_layout":"paragraph","content":"

The formula for calculating your DSO using the simple method is:

\n"},{"acf_fc_layout":"color_block","content":"

DSO = (Accounts Receivables at the end of the period ÷ Gross revenues over the period) × Number of days in the period

\n"},{"acf_fc_layout":"paragraph","content":"

Let’s take an example:

\n"},{"acf_fc_layout":"bullet_list","items":[{"text":"Your gross sales on December 31st are $5,000,000."},{"text":"

Your accounts receivable at the same date are $500,000.

"}]},{"acf_fc_layout":"paragraph","content":"

Using the simple method formula, your DSO is:

\n"},{"acf_fc_layout":"paragraph","content":"

$500,000 / $5,000,000 * 365 = 36,5 days.

\n"},{"acf_fc_layout":"paragraph","content":"

Over that year, 36,5 was the average number of days it took your company to get paid by its customers.

\n"},{"acf_fc_layout":"paragraph","content":"

While this method is the simplest, it has one major drawback: it doesn’t take into account any seasonality in your business. For that, you’d need to calculate your DSO over different timeframes, which defeats the point of simplicity.

\n"},{"acf_fc_layout":"paragraph","content":"

Let’s have a look at a more accurate DSO formula next.

\n"},{"acf_fc_layout":"space_block"},{"acf_fc_layout":"heading","text":"DSO calculation: How to use the Countback Method.","level":"h3"},{"acf_fc_layout":"paragraph","content":"

The countback method is the most accurate way to calculate your DSO. Unlike the simple method, it isn’t based on an average. Instead, it goes back in time month by month to find exactly your days sales outstanding over a period of time.

\n"},{"acf_fc_layout":"paragraph","content":"

You need the same numbers as before, namely your accounts receivable balance and your gross sales at the end of your selected period – but this time for every month.

\n"},{"acf_fc_layout":"paragraph","content":"

From there, you have two options:

\n"},{"acf_fc_layout":"bullet_list","items":[{"text":"

Your accounts receivable is superior to your gross sales: in this case, you can add the number of days in the month straight to your DSO calculation (eg: 30 days).

"},{"text":"

Your accounts receivable is inferior to your gross sales: here, you calculate a ratio between your accounts receivable and your gross sales and multiply the result by the number of days in the month.

"}]},{"acf_fc_layout":"paragraph","content":"

Start with the later month and go backward in time until your gross sales is superior to your A/R. The number you have in your DSO there is your final dso value.

\n"},{"acf_fc_layout":"paragraph","content":""},{"acf_fc_layout":"paragraph","content":"

Let’s take an example:

\n"},{"acf_fc_layout":"paragraph","content":""},{"acf_fc_layout":"table_block","paste_table":"","caption":"","is_first_column_header":false,"header_cells":[{"content":"Period","align":"left","colspan":"1"},{"content":"A/R","align":"left","colspan":"1"},{"content":"Gross Sales","align":"left","colspan":"1"},{"content":"DSO","align":"left","colspan":"1"}],"rows":[{"cells":[{"content":"May (31 days)","align":"left","colspan":"1"},{"content":"$$11,000","align":"left","colspan":"1"},{"content":"$$3,000","align":"left","colspan":"1"},{"content":"31 days","align":"left","colspan":"1"}]},{"cells":[{"content":"June (30 days)","align":"left","colspan":"1"},{"content":"$$8,000","align":"left","colspan":"1"},{"content":"$$1,000","align":"left","colspan":"1"},{"content":"30 + 31 = 61 days","align":"left","colspan":"1"}]},{"cells":[{"content":"July (31 days)","align":"left","colspan":"1"},{"content":"$$7,000","align":"left","colspan":"1"},{"content":"$$10,000","align":"left","colspan":"1"},{"content":"61 + 21 = 82 days","align":"left","colspan":"1"}]}],"style":false},{"acf_fc_layout":"paragraph","content":"

In May, your accounts receivable are higher than gross sales. You can add the days of the month straight to your DSO calculation. You then remove your gross sales from your A/R balance to report it to the following month’s A/R.

\n"},{"acf_fc_layout":"paragraph","content":"

DSO = 31 days.

\n"},{"acf_fc_layout":"paragraph","content":"

$11,000 – $3,000 = $8,000 reported in A/R in June.

\n"},{"acf_fc_layout":"paragraph","content":"

In June, your A/R is again higher than gross sales. You can again add the days of this month to your DSO. Then, you cut down your gross sales from your accounts receivable to report it to the next month’s accounts receivable.

\n"},{"acf_fc_layout":"paragraph","content":"

DSO = 61 days.

\n"},{"acf_fc_layout":"paragraph","content":"

$8,000 – $1,000 = $7,000 reported in A/R in July.

\n"},{"acf_fc_layout":"paragraph","content":"

\n"},{"acf_fc_layout":"color_block","content":"

DSO = (Accounts Receivables at the end of the period / Gross revenues over the period) x Number of days in the period

\n"},{"acf_fc_layout":"paragraph","content":"

$7,000 / $10,000 * 31 days = 21

\n"},{"acf_fc_layout":"paragraph","content":"

DSO = 82 days (61 + 21 days)

\n"},{"acf_fc_layout":"paragraph","content":"

That’s it! You’ve calculated your DSO: 82 days is the time it takes to convert your invoices into cash.

\n"},{"acf_fc_layout":"paragraph","content":"

Do you want to know more about how to calculate your DSO? Check out our article: DSO: A step-by-step guide to calculating Days Sales Outstanding

\n"},{"acf_fc_layout":"paragraph","content":""},{"acf_fc_layout":"heading","text":"4. What Does a Low DSO Mean? ","level":"h2"},{"acf_fc_layout":"space_block"},{"acf_fc_layout":"heading","text":"Is a Low DSO a Good Thing? ","level":"h3"},{"acf_fc_layout":"paragraph","content":"

A low DSO is good news for your business!

\n"},{"acf_fc_layout":"paragraph","content":"

It means your customers respect your payment terms, which in turn is a good indicator of their satisfaction with the service/product you provide. In return, you’ll be able to make the most of your cash flow and pay your suppliers on time.

\n"},{"acf_fc_layout":"paragraph","content":"

A low DSO is therefore an indicator of a fast cash conversion cycle and good liquidity. Companies with a low DSO have their credit policy respected and are able to make the most out of their cash flow, investing it wisely to finance their growth.

\n"},{"acf_fc_layout":"paragraph","content":"

A lower DSO is a sign of good financial health – and investors like that!

\n"},{"acf_fc_layout":"space_block"},{"acf_fc_layout":"heading","text":"What Does a Low DSO Look Like? ","level":"h3"},{"acf_fc_layout":"paragraph","content":"

Your best possible DSO is one close to your payment terms.

\n"},{"acf_fc_layout":"paragraph","content":"

If you have a subscription-based business and most of your clients have an automatic payment set up, your DSO might be zero days. If your clients pay you after 30 days, then having a DSO at 30 days is great, too.

\n"},{"acf_fc_layout":"paragraph","content":"

In summary, it’s all relative! Different industries will have different high or low DSO. You can find a benchmark of the average dso by industry here.

\n"},{"acf_fc_layout":"space_block"},{"acf_fc_layout":"heading","text":"5. What Does a High DSO Mean?","level":"h2"},{"acf_fc_layout":"space_block"},{"acf_fc_layout":"paragraph","content":"

If your DSO varies too far from your payment terms or credit policy, you have a problem: your company is taking too long to collect cash from its customers.

\n"},{"acf_fc_layout":"paragraph","content":"

In startups and scale-ups, there is often an emphasis on the sales team’s efficiency and the net credit sales. However, it’s your actual cash collection that’s key to sustainable growth.

\n"},{"acf_fc_layout":"paragraph","content":"

A high DSO shows you are basically extending an interest-free loan to your clients. It’s cash you could be using for paying your own suppliers or investing in other projects.

\n"},{"acf_fc_layout":"paragraph","content":"

A higher DSO than your payment terms means you’re at risk of running into cash flow problems, especially if you are growing fast.

\n"},{"acf_fc_layout":"paragraph","content":"

And since overdue invoices are more likely to never get paid, you also face the risk of never seeing the money your clients owe you. To prevent this, you can set up payment reminders for your clients, which will help lower your risk and your DSO.

\n"},{"acf_fc_layout":"paragraph","content":"

You’ll find more tips on lowering your DSO in the next part.

\n"},{"acf_fc_layout":"space_block"},{"acf_fc_layout":"heading","text":"6. How to Improve Your DSO? ","level":"h2"},{"acf_fc_layout":"space_block"},{"acf_fc_layout":"paragraph","content":"

If you want to lower your DSO, you have to look at your average accounts receivable process: what does your customer have to do to pay you?

\n"},{"acf_fc_layout":"paragraph","content":"

The easier you can make it for your customer to pay you, the better. Here are a few tips to lower your DSO:

\n"},{"acf_fc_layout":"bullet_list","items":[{"text":"Setting up an efficient invoicing and payment process. Send clear invoices that outline your payment terms and payment methods. Always include the due date and clear instructions to pay you, as well as contact information if there is a problem. Offering various payment options is also a good idea. "}]},{"acf_fc_layout":"bullet_list","items":[{"text":"Use incentives for early or upfront payment: it’s the opposite of punishing your customer for paying late (i.e. charging late payment fees). Offering a discount on their invoices for early or upfront payment creates a win-win situation for everyone. You can decide on an amount of time where they get an incentive and simply inform your customers of your new policy. "}]},{"acf_fc_layout":"bullet_list","items":[{"text":"

Send collection emails: being proactive about your overdue invoices will lower your DSO. You can send emails before the due date, or when your invoice is past due. Trust us, your receivable balance will benefit from it!

"}]},{"acf_fc_layout":"heading","text":"7. Is a Spreadsheet Enough to Calculate DSO? ","level":"h2"},{"acf_fc_layout":"paragraph","content":"

Using a spreadsheet to find your DSO ratio is tempting – after all, which finance person doesn’t use Excel? Is Excel the most efficient to calculate your DSO, however? No.

\n"},{"acf_fc_layout":"space_block"},{"acf_fc_layout":"heading","text":"Using spreadsheets to calculate your DSO.","level":"h3"},{"acf_fc_layout":"paragraph","content":"

In a nutshell, using spreadsheets for this purpose is too time-consuming and not accurate enough.

\n"},{"acf_fc_layout":"paragraph","content":"

To get your company’s DSO number, you need your accounts receivable balance as well as your gross sales over a period of time. They might be available on your financial statements already, but what if you want to calculate your DSO over the current period or a projected period of time?

\n"},{"acf_fc_layout":"paragraph","content":"

The point here is that finding the most accurate numbers can be tricky and lead to errors. Plus, switching between various spreadsheets to chase up-to-date numbers isn’t the best use of anyone’s time.

\n"},{"acf_fc_layout":"paragraph","content":"

If you choose to use the countback method (which we recommend), it also requires quite a lot of time to calculate. It’s much easier, and faster, to use an automated solution.

\n"},{"acf_fc_layout":"space_block"},{"acf_fc_layout":"heading","text":"Automating your DSO calculation.","level":"h3"},{"acf_fc_layout":"paragraph","content":"

Regardless of the way you choose to calculate your days sales outstanding, what matters most is to be consistent in your measurement.

\n"},{"acf_fc_layout":"paragraph","content":"

It’ll give you insights into your business and allow you to course-correct sooner rather than later. Less time spent on calculation, more on action is how we roll.

\n"},{"acf_fc_layout":"paragraph","content":"

A tool like Upflow calculates your DSO for you in real-time, making it easy to know your dso number at any time. That’s especially handy if you’re preparing a financial report for your CEO or board. More importantly, it saves you time, which you can spend on strategizing and problem-solving.

\n"},{"acf_fc_layout":"hubspot_cta","id":"5dce7b06-14d0-4a82-a83c-2c25ba953ea2","alt":"Analytics by Upflow"},{"acf_fc_layout":"space_block"},{"acf_fc_layout":"paragraph","content":"

Key Takeaways:

\n"},{"acf_fc_layout":"bullet_list","items":[{"text":"

Your Days Sales Outstanding measures the days it takes your clients to pay their invoices. It’s a very important A/R KPI as it indicates your liquidity.

"},{"text":"

Tracking your DSO allows you to better manage your cash flow. A low DSO is ideal, whereas a high DSO can lead to cash flow problems.

"},{"text":"A DSO can be relatively high or low depending on your industry. As a rule, the closer your dso number is to your payment terms, the better. "}]},{"acf_fc_layout":"bullet_list","items":[{"text":"You can calculate your DSO value using the simple method or the countback method. The latter is more accurate but also takes more time. "}]},{"acf_fc_layout":"bullet_list","items":[{"text":"

To lower your DSO, you need to make your invoicing and payment processes a breeze for your clients. You can also set up incentives for upfront or early payments and/or start sending payment reminders.

"},{"text":"Even though spreadsheets might seem the first choice to calculate your DSO, it’s not the best one as it’s error-prone and time-consuming. A better alternative is using automated software, like Upflow. "}]},{"acf_fc_layout":"paragraph","content":""}],"primary_category":{"term_id":393,"name":"Reduce DSO","slug":"reduce-dso","term_group":0,"term_taxonomy_id":116,"taxonomy":"category","description":"DSO is a crucial metric to track: it indicates how long it takes you to get paid by your clients. The closer it is to your payment terms, the better. Here you'll find articles and resources to help you reduce your DSO and get your business on the right track.","parent":0,"count":9,"filter":"raw"},"related_author_id":10617,"right_sidebar_call_to_action_id":"","right_sidebar_call_to_action_alt":"","date_modified":"29/07/2026","og_image":false,"og_title":"","og_description":"","canonical_mode":"auto","x_default_mode":"auto","noindex":false,"nofollow":false,"_taxonomies":{"category":[{"id":374,"name":"AR metrics","slug":"ar-metrics","description":"Tracking your receivable KPIs is crucial to mesure the efficiency of your cash collection. But which metric should you track? And how can you calculate and improve them? Have a look at our dedicated articles.","parent":null},{"id":393,"name":"Reduce DSO","slug":"reduce-dso","description":"DSO is a crucial metric to track: it indicates how long it takes you to get paid by your clients. The closer it is to your payment terms, the better. Here you'll find articles and resources to help you reduce your DSO and get your business on the right track.","parent":null}],"translation_priority":[{"id":11,"name":"Optional","slug":"optional","description":"","parent":null}]}},"publishedAt":"May 11, 2022","publishedAtIso":"2022-05-11T02:00:00Z","modifiedAtIso":"$undefined"},{"title":"B2B SaaS: 9 Key Financial Metrics You Should Track","description":"By seeing what works and what doesn’t in your B2B SaaS business, financial metrics improve your decision-making for the future – and your cash management too.","image":"https://cms.upflow.dev.3codes.io/wp-content/uploads/2022/03/b2b-saas-key-financial-metrics.png","imageAlt":"","fields":{"link":"/blog/ar-metrics/b2b-saas-key-financial-metrics","_taxonomies":{"article_type":[{"id":374,"name":"AR metrics","slug":"ar-metrics","description":""}]},"author":{"name":"Alexandre Antoine","image":"https://cms.upflow.dev.3codes.io/wp-content/uploads/2026/07/9-1.png","description":"

\n","position":"Finance Director at Upflow","slug":"alex-finance-director"}},"acf":{"seo_title":"B2B SaaS: 9 Key Financial Metrics You Should Track","seo_description":"Planning for growth is at the heart of every successful business. In order to have an accurate growth strategy, you need reliable data. Financial metrics do just that: they help you plan for your long-term success.","body":[{"acf_fc_layout":"paragraph","content":"

Planning for growth is at the heart of every successful business. In order to have an accurate growth strategy, you need reliable data. Financial metrics do just that: they help you plan for your long-term success.

\n"},{"acf_fc_layout":"paragraph","content":"

By seeing what works and what doesn’t in your B2B SaaS business, SaaS finance metrics improve your decision-making for the future – and your cash management too.

\n"},{"acf_fc_layout":"paragraph","content":"

Many KPIs exist and it can be hard to know which ones matter the most for your SaaS company. Keep reading to find the 9 financial SaaS metrics we advise following, how to calculate them and how to track them effectively.

\n"},{"acf_fc_layout":"paragraph","content":"

One thing we can tell you already is to pay attention to A/R metrics – which Upflow helps you achieve easily with specific dashboards.

\n"},{"acf_fc_layout":"hubspot_cta","id":"8df0d460-70d0-40c2-bea0-b8236477d27a","alt":"cta demo request"},{"acf_fc_layout":"space_block"},{"acf_fc_layout":"heading","text":"MRR - Monthly Recurring Revenue","level":"h2"},{"acf_fc_layout":"heading","text":"What Is MRR And Why It’s Important.","level":"h3"},{"acf_fc_layout":"paragraph","content":"

Your Monthly Recurring Revenue is a key metric in your B2B SaaS business. It represents the recurring revenue you have coming in every month: subscription fee, add-ons, special features, etc.

\n"},{"acf_fc_layout":"paragraph","content":"

Your MRR is a good indicator of your business health as a fast-growing company.

\n"},{"acf_fc_layout":"heading","text":"How To Calculate Your MRR.","level":"h3"},{"acf_fc_layout":"paragraph","content":"

Your MRR is calculated every month by taking your average amount of subscription (with optional add-ons) multiplied by your number of customers on the period.

\n"},{"acf_fc_layout":"color_block","content":"

MRR = Number of customers x Average amount of a subscription

\n"},{"acf_fc_layout":"heading","text":"How To Grow Your MRR.","level":"h3"},{"acf_fc_layout":"paragraph","content":"

Your MRR should be growing every month. If it’s not the case, there are by definition two variables you can improve to grow your MRR: your average subscription fee or the number of clients you have.

\n"},{"acf_fc_layout":"paragraph","content":"

Maybe it’s time to rethink your strategy to grow your customer base, focus more on your upsell or streamline your billing and transaction management processes. Whatever you do, it’s better to be proactive.

\n"},{"acf_fc_layout":"space_block"},{"acf_fc_layout":"heading","text":"ARR - Annual Recurring Revenue","level":"h2"},{"acf_fc_layout":"heading","text":"What’s ARR and Why It Matters.","level":"h3"},{"acf_fc_layout":"paragraph","content":"

Your Annual Recurring Revenue is the yearly amount of recurring revenue you get from your clients. It is exactly like your MRR but on a year scale.

\n"},{"acf_fc_layout":"paragraph","content":"

Your ARR helps you compare your growth year after year. Seeing the big picture of your revenue increase helps you make long-term decisions more accurately, thus this metric is also important for your financial reporting dashboard.

\n"},{"acf_fc_layout":"heading","text":"How to Calculate Your ARR.","level":"h3"},{"acf_fc_layout":"paragraph","content":"

To calculate your Annual Recurring Revenue, simply take your Monthly Recurring Revenue and multiply it by 12.

\n"},{"acf_fc_layout":"color_block","content":"

ARR = Monthly Recurring Revenue x 12

\n"},{"acf_fc_layout":"heading","text":"What to Do If Your ARR isn’t as High as You Want.","level":"h3"},{"acf_fc_layout":"paragraph","content":"

If your ARR metric is lower than what you’d like, it can help to dive into each Monthly Recurring Revenue and see what happened exactly each month.

\n"},{"acf_fc_layout":"paragraph","content":"

You might find, based on one or several ARR reports, that you have a seasonal business. Or you might have had to face unforeseen circumstances that affected your market (hello, covid-19!).

\n"},{"acf_fc_layout":"paragraph","content":"

From there, you can plan for the future with new offers, added paid features, or even plans to explore new markets.

\n"},{"acf_fc_layout":"space_block"},{"acf_fc_layout":"heading","text":"CAC - Customer Acquisition Cost","level":"h2"},{"acf_fc_layout":"heading","text":"What is CAC and Why is it Essential for Your SaaS Business?","level":"h3"},{"acf_fc_layout":"paragraph","content":"

Your Customer Acquisition Cost is one of the most important SaaS financial metrics to track. It indicates the cost induced to get new customers over a given period.

\n"},{"acf_fc_layout":"paragraph","content":"

Keeping an eye on your CAC is useful to track which marketing actions were effective, which means you’ll be able to redouble your effort (and money) on what works – not on the rest.

\n"},{"acf_fc_layout":"paragraph","content":"

On the other hand, if your CAC is higher than your CLV (which we’ll see below), it means you are losing money by being in business – not great and definitely not sustainable.

\n"},{"acf_fc_layout":"heading","text":"Calculating Your CAC.","level":"h3"},{"acf_fc_layout":"paragraph","content":"

Your CAC equals your marketing and sales expenses incurred over the number of new clients gained during a given period.

\n"},{"acf_fc_layout":"paragraph","content":"

You usually have a global CAC metric, but you can also get more specific by measuring the CAC for your Google Ads.

\n"},{"acf_fc_layout":"color_block","content":"

CAC = Marketing and sales expenses over a given period / Number of clients obtained during that period

\n"},{"acf_fc_layout":"heading","text":"How to Lower Your CAC.","level":"h3"},{"acf_fc_layout":"paragraph","content":"

With your CAC, it’s a matter of keeping it as low as possible. If it begins to skyrocket, something is off.

\n"},{"acf_fc_layout":"paragraph","content":"

Our first advice would be to talk with your marketing or sales team to see what’s going on. Then, you can choose to redirect some of your effort towards a new strategy.

\n"},{"acf_fc_layout":"space_block"},{"acf_fc_layout":"heading","text":"DSO - Days Sales Outstanding","level":"h2"},{"acf_fc_layout":"heading","text":"What is DSO and Why It's Important.","level":"h3"},{"acf_fc_layout":"paragraph","content":"

Your Days Sales Outstanding is an important metric. It represents the number of days it takes for your invoices to be paid. A low DSO is a sign of good company performance and of an efficient collection process.

\n"},{"acf_fc_layout":"paragraph","content":"

Your DSO is an important A/R metric that influences your cash management, crucial for fast-growing SaaS companies.

\n"},{"acf_fc_layout":"heading","text":"How to Calculate Your DSO.","level":"h3"},{"acf_fc_layout":"paragraph","content":"

There are 2 ways to calculate your DSO:

\n"},{"acf_fc_layout":"bullet_list","items":[{"text":"The simple method, based on the average number of days it takes for your customers to pay you"},{"text":"The countback method, where you go back month by month to find how many days your clients took to pay you on a given period."}]},{"acf_fc_layout":"paragraph","content":"

The third secret way to do this is to use software like Upflow that calculates it for you!

\n"},{"acf_fc_layout":"paragraph","content":"

Need help calculating it manually? Have a look at our free A/R metric spreadsheet.

\n"},{"acf_fc_layout":"hubspot_cta","id":"ab85080f-1635-4491-b739-2e6fb6f385b7","alt":"cta ar spreadsheet"},{"acf_fc_layout":"space_block"},{"acf_fc_layout":"heading","text":"How to Reduce Your DSO.","level":"h3"},{"acf_fc_layout":"paragraph","content":"

The key to reducing your DSO is to be proactive: having efficient invoicing and payment processes is primordial. You can also look at incentivizing early payments and – of course – automating this process with Upflow.

\n"},{"acf_fc_layout":"paragraph","content":"

Are your late payments piling-up and your DSO too high? Have a look at our free guide with tips to get paid on time!

\n"},{"acf_fc_layout":"space_block"},{"acf_fc_layout":"heading","text":"Churn Rate","level":"h2"},{"acf_fc_layout":"heading","text":"What Is Churn Rate and Why it Matters to Your SaaS Business.","level":"h3"},{"acf_fc_layout":"paragraph","content":"

Your Churn Rate (also known as customer attrition rate) is the rate at which your customers are leaving you. We know – it’s sad! But keeping an eye on this finance metric means you’ll be able to set up effective strategies to lower it.

\n"},{"acf_fc_layout":"paragraph","content":"

Churn is a natural part of the customer lifecycle and measures your customer retention. In a way, it’s a measure of your customer success.

\n"},{"acf_fc_layout":"paragraph","content":"

Some of it is voluntary – your customers don’t want to use your product anymore, and some of it is involuntary – when a payment fails, for example. That’s why having a dunning strategy in place is great to reduce your churn rate.

\n"},{"acf_fc_layout":"heading","text":"How to Calculate Your Churn Rate","level":"h3"},{"acf_fc_layout":"paragraph","content":"

You get your Churn Rate by making a ratio between the customers who unsubscribed over the customers you had at the start of a period.

\n"},{"acf_fc_layout":"color_block","content":"

Customer Churn Rate = Customers unsubscribed over the period / Number of customers at the start of the period

\n"},{"acf_fc_layout":"heading","text":"How to Reduce Your Churn Rate.","level":"h3"},{"acf_fc_layout":"paragraph","content":"

One of the golden rules of marketing: it is cheaper to keep your existing customers than to acquire new ones. Lowering your churn rate means keeping your customers longer.

\n"},{"acf_fc_layout":"paragraph","content":"

To do so, have a look at your subscription management process or use customer experience management tools to get feedback from your customers. Specifically, your involuntary churn rate – being proactive about it will make a big difference!

\n"},{"acf_fc_layout":"paragraph","content":"

Are your late payments piling-up and your DSO too high? Have a look at our free guide with tips to get paid on time!

\n"},{"acf_fc_layout":"space_block"},{"acf_fc_layout":"hubspot_cta","id":"60129848-c9b6-4924-9af4-9f5af5bcc8e1","alt":"download white paper"},{"acf_fc_layout":"space_block"},{"acf_fc_layout":"heading","text":"Gross Margin","level":"h2"},{"acf_fc_layout":"heading","text":"What is Gross Margin and Why it's Important.","level":"h3"},{"acf_fc_layout":"paragraph","content":"

Your Gross Margin is the amount you get after deducting your direct expenses – ie your profitability. In SaaS companies, the expenses tend to be high at the beginning but the business eventually reaches higher margins. But how high?

\n"},{"acf_fc_layout":"paragraph","content":"

As you perfect your product and move towards a bigger market penetration, your margin should get higher.

\n"},{"acf_fc_layout":"heading","text":"How to Calculate Gross Margin in SaaS Companies.","level":"h3"},{"acf_fc_layout":"paragraph","content":"

Your gross margin is your net sales minus your Cost of Goods Sold. Careful not to deduct the SG&A (Service, General & Administrative) costs in there but only the direct ones, such as labor or machinery.

\n"},{"acf_fc_layout":"heading","text":"How to Get a More Accurate Gross Margin.","level":"h3"},{"acf_fc_layout":"paragraph","content":"

B2B SaaS businesses often have several streams of revenue. It is therefore important to have gross margin metrics for each of these streams – including one for recurring revenues.

\n"},{"acf_fc_layout":"space_block"},{"acf_fc_layout":"heading","text":"CLV - Customer Lifetime Value","level":"h2"},{"acf_fc_layout":"heading","text":"What is CLV and Why is it Important?","level":"h3"},{"acf_fc_layout":"paragraph","content":"

Your Customer Lifetime Value is one of the key metrics of your SaaS. It tells you how much on average customers bring to your company while they’re in business with you.

\n"},{"acf_fc_layout":"paragraph","content":"

Keeping your CLV in mind (or readily available) is essential to know what value a customer will bring you throughout their lifecycle. It brings together your CAC and your Churn Rate into a concrete metric you can easily monitor.

\n"},{"acf_fc_layout":"heading","text":"How to Calculate Your CLV","level":"h3"},{"acf_fc_layout":"paragraph","content":"

There are different ways to calculate your CLV with more or fewer details. The most direct customer lifetime value formula is to multiply your average profit per customer with the average time they stay with you. Subtract this amount to your CAC.

\n"},{"acf_fc_layout":"heading","text":"How to Increase Your CLV in SaaS","level":"h3"},{"acf_fc_layout":"paragraph","content":"

To increase your CLV, you can reduce your churn rate or your CAC. You can also increase the average profit per customer. A good way to do the latter is to make sure you offer relevant upsells.

\n"},{"acf_fc_layout":"paragraph","content":"

It’s also interesting to have a look at your CLV for different subgroups within your customer base – it might be time to offer a higher-priced subscription to one of them?

\n"},{"acf_fc_layout":"space_block"},{"acf_fc_layout":"heading","text":"Bookings.","level":"h2"},{"acf_fc_layout":"heading","text":"What are Bookings in SaaS and Why are they Important?","level":"h3"},{"acf_fc_layout":"paragraph","content":"

Bookings is a future-based metric. It indicates the value of contracts agreed upon between your SaaS and your clients – which should equate to revenues in the future.

\n"},{"acf_fc_layout":"paragraph","content":"

However, it saves you from artificially inflating your MRR and ARR as you don’t record your bookings into them.

\n"},{"acf_fc_layout":"paragraph","content":"

Your bookings are one of the key SaaS financial metrics as it gives you an estimate of the revenue that will come into your business. It helps you gauge how much your product is on demand.

\n"},{"acf_fc_layout":"paragraph","content":"

In the case of subscription-based companies, signing a new 3-year contract with a client is booking. Revenue is when the cash comes in and/or is recognized; it is a GAAP term.

\n"},{"acf_fc_layout":"heading","text":"Calculating Your SaaS Bookings.","level":"h3"},{"acf_fc_layout":"paragraph","content":"

Your bookings is the total value of new contracts with customers at a given period, in any currency.

\n"},{"acf_fc_layout":"heading","text":"How to Get More Bookings.","level":"h3"},{"acf_fc_layout":"paragraph","content":"

If it’s lower than you’d like, it’s time to increase your sales and marketing efforts.

\n"},{"acf_fc_layout":"paragraph","content":"

Annual and longer-term contracts are a great way to boost your bookings. Optimizing your processes to be long-term orientated is a great way to foster your growth.

\n"},{"acf_fc_layout":"paragraph","content":"

Pay close attention to your churn rate as well, as it has a direct influence on your bookings.

\n"},{"acf_fc_layout":"space_block"},{"acf_fc_layout":"heading","text":"ARPU - Average Revenue Per User","level":"h2"},{"acf_fc_layout":"heading","text":"What is ARPU and why is it Important?","level":"h3"},{"acf_fc_layout":"paragraph","content":"

Your Average Revenue Per User is the value you get on average per user. It’s similar to the CLV, without the lifetime component.

\n"},{"acf_fc_layout":"paragraph","content":"

Your ARPU increases with time and is a sign of your SaaS’ good health. It’s important to keep this key metric high as it means more revenue, since your average user value increases. This means that when you broaden your customer base, you’ll get even more revenue!

\n"},{"acf_fc_layout":"heading","text":"How to calculate your ARPU","level":"h3"},{"acf_fc_layout":"paragraph","content":"

Your ARPU is straightforward to get: you divide your total revenue over the number of your clients for a given period.

\n"},{"acf_fc_layout":"color_block","content":"

ARPU = Total revenue in a specific period of time / Total number of users in that same time period

\n"},{"acf_fc_layout":"heading","text":"ARPU Optimization.","level":"h3"},{"acf_fc_layout":"paragraph","content":"

Your ARPU is a great metric to monitor as it gives you important feedback on your overall strategy:

\n"},{"acf_fc_layout":"bullet_list","items":[{"text":"If your ARPU is close to your highest paying offer, for example, it might mean your customers want to pay you more. Time to craft a new offer at a higher price point!"},{"text":"If it’s close to your average pricing, it can also be a smart move to increase your current prices. "}]},{"acf_fc_layout":"paragraph","content":"

You’ve seen the most important SaaS metrics – now what? At Upflow we like to give you information that’s relevant but also practical, so keep reading to find out how to track these metrics in a way that’s scalable.

\n"},{"acf_fc_layout":"hubspot_cta","id":"45d64f0e-66b1-4cea-8d72-f2fec1726ceb","alt":"cta ar metrics spreadsheet"},{"acf_fc_layout":"space_block"},{"acf_fc_layout":"heading","text":"Track Your Key SaaS Metrics Effectively.","level":"h2"},{"acf_fc_layout":"paragraph","content":"

The best way to track your saas financial metrics is to use software, rather than excel. Indeed, what can be done at the beginning of your startup manually needs to be automated so you can be more efficient.

\n"},{"acf_fc_layout":"paragraph","content":"

Here are the benefits of using software to help you track your key metrics:

\n"},{"acf_fc_layout":"space_block"},{"acf_fc_layout":"heading","text":"Have Reliable Data, The Smart Way","level":"h3"},{"acf_fc_layout":"paragraph","content":"

As a CFO, your time is valuable and much better used for strategic decision-making. And to make the best decisions, you need the best data. We’re back to our saas operating metrics!

\n"},{"acf_fc_layout":"paragraph","content":"

Using software not only allows you to save time on these metrics (and your team’s too) it allows you to have accurate data.

\n"},{"acf_fc_layout":"paragraph","content":"

Calculating all these SaaS metrics manually can take time. Not because the formulas are complicated (you’ve seen that they’re not) but because you need to have reliable numbers to get reliable results.

\n"},{"acf_fc_layout":"paragraph","content":"

Switching from spreadsheet to spreadsheet to track the latest number doesn’t exactly say “fail-proof or efficient process” either. You also need a machine that has 100% of their calculations right – and as amazing as it is, that’s not the human brain.

\n"},{"acf_fc_layout":"paragraph","content":"

Centralizing your data in a software ecosystem means you’ll always have the latest data and therefore the most up-to-date metrics, now and as you scale. As your company grows and your financial operations become more complex, you might also consider setting up a finance data warehouse.

\n"},{"acf_fc_layout":"space_block"},{"acf_fc_layout":"heading","text":"Get In-Depth SaaS Company Financial Metrics.","level":"h3"},{"acf_fc_layout":"paragraph","content":"

Not only are your SaaS metrics going to be more accurate because they’re correct, but with software, you’ll also be able to get more precision.

\n"},{"acf_fc_layout":"paragraph","content":"

Subscription management software offer customizable and detailed reports that will give you more accuracy on your metrics. Chargebee for example gives you access to a Churn Breakdown Table that offers more details on your churn rate: when did the customers churn, how long after signing up, etc.

\n"},{"acf_fc_layout":"paragraph","content":"

This can help you identify more precisely the reasons for churn and act against it, rather than trying to improve your churn on a global scale. It can also help you make strategic decisions and focus on the type of customers or offer that is the most profitable or grows the fastest.

\n"},{"acf_fc_layout":"paragraph","content":"

On Upflow, your DSO is automatically calculated on a monthly basis. You also have access to the detail of unpaid invoices on a given month and the average payment delay per client. This will enable you to adapt your A/R collection for your different types of clients and customize your workflows.

\n"},{"acf_fc_layout":"hubspot_cta","id":"8df0d460-70d0-40c2-bea0-b8236477d27a","alt":"cta demo request"},{"acf_fc_layout":"paragraph","content":"

In short: software does the heavy lifting for you, with a high level of detail. The metrics it delivers are more accurate and the best thing is: they’re right here at your fingertips.

\n"},{"acf_fc_layout":"space_block"},{"acf_fc_layout":"paragraph","content":"

Key Takeaways:

\n"},{"acf_fc_layout":"bullet_list","items":[{"text":"The most important SaaS metrics for your B2B Scale-Up are your MRR, ARR, CAC, DSO, churn rate, gross margin, CLV, bookings, and ARPU. While it may seem like a lot to track, they’re all important in their own way. "},{"text":"The good news is that there is an effective way to track them all: software. Using software gives you more accuracy and more details on these SaaS metrics."},{"text":"Reliable metrics are keys to supporting your strategic decision-making as a CFO. It’s also something you can use for benchmarks and/or leverage for a valuation. "},{"text":"Upflow is an A/R collection software that displays relevant financial SaaS metrics. "}]}],"primary_category":{"term_id":374,"name":"AR metrics","slug":"ar-metrics","term_group":0,"term_taxonomy_id":97,"taxonomy":"category","description":"Tracking your receivable KPIs is crucial to mesure the efficiency of your cash collection. But which metric should you track? And how can you calculate and improve them? Have a look at our dedicated articles.","parent":0,"count":27,"filter":"raw"},"related_author_id":10617,"right_sidebar_call_to_action_id":"","right_sidebar_call_to_action_alt":"","date_modified":"29/07/2026","og_image":false,"og_title":"","og_description":"","canonical_mode":"auto","x_default_mode":"auto","noindex":false,"nofollow":false,"_taxonomies":{"category":[{"id":374,"name":"AR metrics","slug":"ar-metrics","description":"Tracking your receivable KPIs is crucial to mesure the efficiency of your cash collection. But which metric should you track? And how can you calculate and improve them? Have a look at our dedicated articles.","parent":null},{"id":395,"name":"SaaS Finance","slug":"saas-finance","description":"SaaS businesses have specificities (different pricing ranges, subscription models, etc.) that can be overwhelming for their finance teams. Check out our latest articles on SaaS finance to bring your company to the next level!\n","parent":null}],"translation_priority":[{"id":11,"name":"Optional","slug":"optional","description":"","parent":null}]}},"publishedAt":"March 16, 2022","publishedAtIso":"2022-03-16T01:00:00Z","modifiedAtIso":"$undefined"},{"title":"Why Is Cash Forecasting Essential to Your Growing Business And How To Build It?","description":"Knowledge is power. Any company, but especially a fast-growing one, needs accurate cash flow forecasts. Here’s why!","image":"https://cms.upflow.dev.3codes.io/wp-content/uploads/2022/03/cash-forecasting-growing-companies.png","imageAlt":"","fields":{"link":"/blog/ar-metrics/cash-forecasting-growing-companies","_taxonomies":{"article_type":[{"id":374,"name":"AR metrics","slug":"ar-metrics","description":""}]},"author":{"name":"Alex Louisy","image":"https://cms.upflow.dev.3codes.io/wp-content/uploads/2026/07/7.png","description":"$65","position":"Co-founder and CEO of Upflow","slug":"alexandre"}},"acf":{"seo_title":"Why Is Cash Forecasting Essential to Your Growing Business And How To Build It?","seo_description":"Cash flow forecasting is a projection of your future cash available. With this information, you can plan your strategy. The difficulty with cash flow projection is to actually calculate it: without the right tool, this process can be tedious","body":[{"acf_fc_layout":"paragraph","content":"

When it comes to business, cash is king. Being able to predict accurate cash flow is helpful for any company, as it helps your decision-making for long-term success.

\n"},{"acf_fc_layout":"paragraph","content":"

Cash flow forecasting is a projection of your future cash available, by calculating the timing of your future cash inflow and outflows.

\n"},{"acf_fc_layout":"paragraph","content":"

It’s useful to know the amount of cash that will get in and out of your business over a given time period. With this information, you can plan ahead and adjust your strategy.

\n"},{"acf_fc_layout":"paragraph","content":"

The difficulty with cash flow projection is to actually calculate it. There are many data sources to compile, and they all need to be relevant for your result to be accurate. Without the right tool, this process can be tedious – although it is possible to break it down in: cash inflow and cash outflow.

\n"},{"acf_fc_layout":"paragraph","content":"

That’s where we come in: Upflow, our in-house Accounts Receivable software, now offers a cash inflow forecast feature! Based on your previous sales and your past collection speed, this automated process can give you an accurate cash inflow forecast easily.

\n"},{"acf_fc_layout":"hubspot_cta","id":"8df0d460-70d0-40c2-bea0-b8236477d27a","alt":"Demo"},{"acf_fc_layout":"paragraph","content":"

Whether you already use a tool or not, read on to discover the benefits of cash flow forecasting. We also share details on how to calculate your own cash flow projections for your B2B scale-up.

\n"},{"acf_fc_layout":"heading","text":"What Are The Benefits Of Cash Flow Forecasting? ","level":"h2"},{"acf_fc_layout":"paragraph","content":"

Knowledge is power. Apart from making a great quote, this statement couldn’t be truer for cash flow projections. Any business and business owner, but especially a fast-growing one, needs accurate cash flow forecasts. Here is why:

\n"},{"acf_fc_layout":"heading","text":"Better Cash Management: ","level":"h3"},{"acf_fc_layout":"paragraph","content":"

Cash flow forecasting helps determine if you have too many cash outflows compared to your cash inflows – before it becomes a problem. You might have record sales coming in, but if you don’t have enough cash, you will be in a challenging situation.

\n"},{"acf_fc_layout":"paragraph","content":"

On the other hand, knowing if you have a surplus of positive cash flow ahead will help you make the most of it. You could be earning returns on this extra liquidity or using it for debt repayments.

\n"},{"acf_fc_layout":"heading","text":"Problem-solving: ","level":"h3"},{"acf_fc_layout":"paragraph","content":"

Having accurate cash flow forecasts means you’ll be able to take action in time to course-correct, should any problem arise.

\n"},{"acf_fc_layout":"paragraph","content":"

If a negative cash flow arises from your cash flow forecast, for instance, you might double down on your accounts receivable efforts. Indeed, it could be the perfect time to optimize your A/R collection process with automation.

\n"},{"acf_fc_layout":"paragraph","content":"

Even in a fast-paced environment, it is good to be able to fix situations ahead of time, before they become a real problem.

\n"},{"acf_fc_layout":"heading","text":"Stakeholder Satisfaction: ","level":"h3"},{"acf_fc_layout":"paragraph","content":"

There is a reason investors ask for regular cash forecast reports with your business plans. They know your cash flow management can make or break your business.

\n"},{"acf_fc_layout":"paragraph","content":"

Depending on the stage of your business, investors might be looking more at your cash inflow or your burn rate (cash outflow).

\n"},{"acf_fc_layout":"paragraph","content":"

Being able to produce cash flow forecasts quickly and accurately shows you’re making it a priority.

\n"},{"acf_fc_layout":"paragraph","content":"

It’s also a good way to ensure that your employees will be paid on time every month – which is best for talent retention. The same goes for your suppliers. You could even get discounts on your Accounts Payable by paying your invoices early.

\n"},{"acf_fc_layout":"heading","text":"Forward Planning: ","level":"h3"},{"acf_fc_layout":"paragraph","content":"

With the best data, you can make the best decisions. Knowing your cash positions in advance means you can plan for your growth. You can adapt to the reality of your negative or positive cash flows with short-term and long-term strategies.

\n"},{"acf_fc_layout":"paragraph","content":"

All in all, cash flow forecasting helps your B2B fast-growing company get accurate long-term forecasts and establish a well-thought-out strategy to foster your growth. If you’re a CFO, it will make your decision-making and budget planning easier and more efficient.

\n"},{"acf_fc_layout":"paragraph","content":"

Now you know some of the benefits of cash flow forecasting, you probably want to know how to make accurate cash flow projections for your business.

\n"},{"acf_fc_layout":"paragraph","content":"

Need help to calculate your top A/R metrics? Download our free spreadsheet!

\n"},{"acf_fc_layout":"snippet_block","code":" $\"download$ "},{"acf_fc_layout":"heading","text":"How To Make Accurate Cash Flow Forecasts? ","level":"h2"},{"acf_fc_layout":"heading","text":"Manual methods to calculate your cash forecast","level":"h3"},{"acf_fc_layout":"paragraph","content":"

To calculate your cash flow forecasts, start by choosing a time period. Budgeting exercises and forecasting exercises are either done on a quarterly or yearly basis, depending on the size of the company.

\n"},{"acf_fc_layout":"paragraph","content":"

At Upflow, our finance team does it on a yearly basis, but public companies for instance do it on a quarterly basis, as their stakes are much higher.

\n"},{"acf_fc_layout":"paragraph","content":"

Once you have chosen the time period that suits your needs, you can move onto the method you’d like to use.

\n"},{"acf_fc_layout":"paragraph","content":"

There are two ways to calculate your cash flow forecast:

\n"},{"acf_fc_layout":"bullet_list","items":[{"text":"The direct method is based on the precise moment when your cash is projected to come in and out of your business’ bank account. "}]},{"acf_fc_layout":"paragraph","content":"

You get it by subtracting your expenditures from your receivables. Although it is quite straightforward, it can be time-consuming for companies with a high volume of transactions or the ones using accrual accounting. The direct method tends to be used for short-based forecasts and/or small businesses that use the cash-basis method.

\n"},{"acf_fc_layout":"bullet_list","items":[{"text":"The indirect method on the other hand is more widely spread. It relies on your profit & loss statement and your balance sheet, so it uses data that has already been recorded. "}]},{"acf_fc_layout":"paragraph","content":"

To translate it into a cash flow forecast, the net income is adjusted with the operations that affect your profits but not your cash flow. It is easier to compute high volumes of transactions with this method and produces longer time forecasts.

\n"},{"acf_fc_layout":"paragraph","content":"

As they serve different purposes, both methods tend to be used in conjunction. Regardless of the method you choose, you will next need to gather the data needed to calculate your cash flow forecast, namely:

\n"},{"acf_fc_layout":"bullet_list","items":[{"text":"Your cash balance at the beginning of the selected period,"},{"text":"Your forecasted cash inflow over the selected period, by type,"},{"text":"Your forecasted cash outflow over the selected period, by type."}]},{"acf_fc_layout":"paragraph","content":"

As a starting point, you can use the data from your balance sheet and bank account. Add to this your planned cash inflows from sales and your A/R. Subtract your projected expenses (remember your A/P!). And there you have it: your cash flow forecast.

\n"},{"acf_fc_layout":"heading","text":"Use automated tools to calculate your forecast","level":"h3"},{"acf_fc_layout":"paragraph","content":"

In essence, it is simple to get a cash flow forecast. In practice, having an accurate cash flow forecast can be a challenge: computing all this data takes time to do.

\n"},{"acf_fc_layout":"paragraph","content":"

That’s especially true if you’re doing it manually, using excel spreadsheets. You have to compile different sources while ensuring all the data you are selecting is accurate. And that’s without the human-made errors that can easily get in the way.

\n"},{"acf_fc_layout":"paragraph","content":"

For B2B companies with different offers, subscription plans, and payments plans… it can become a nightmare.

\n"},{"acf_fc_layout":"paragraph","content":"

Your best option to compute accurate cash flow forecasts is therefore to use an automated tool that integrates with your accounting software. For one, the risk of error is lessened. Automated forecasts also free up your schedule and leave you more time for the actual analysis of your forecast and planning for your growth.

\n"},{"acf_fc_layout":"paragraph","content":"

Convinced? Then consider giving Upflow a try! We have just released a cash inflow forecast feature (picture above). Based on your previous cash collection rate, you can get a cash inflow projection for the next 6 months.

\n"},{"acf_fc_layout":"paragraph","content":"

The best part: it’s all done for you automatically with your latest data. With these accurate cash inflow reports at your fingertips, you can focus on what really matters: strategic decision-making for your future growth.

\n"},{"acf_fc_layout":"snippet_block","code":" $\"download$ "},{"acf_fc_layout":"paragraph","content":"

Key Takeaways

\n"},{"acf_fc_layout":"paragraph","content":"

As a scale-up, cash forecasting is essential. It’ll help you prepare for your growth, solve problems before they arise, and keep your stakeholders happy. It also means better cash management for the short-term and long-term future. You’ll know at any given time the actual cashflow of your company.

\n"},{"acf_fc_layout":"hubspot_cta","id":"eed4ccd6-5fb9-494d-8bba-c73d99199d77","alt":"discover upflow"},{"acf_fc_layout":"paragraph","content":"

While cash flow projections are easy enough to calculate on paper, in reality, they can become quite tedious and error-prone. Being a CFO of a business scaling up, your time is too valuable to use spreadsheets (or paper). In order to be efficient and accurate, we advise using an automated tool.

\n"}],"primary_category":{"term_id":374,"name":"AR metrics","slug":"ar-metrics","term_group":0,"term_taxonomy_id":97,"taxonomy":"category","description":"Tracking your receivable KPIs is crucial to mesure the efficiency of your cash collection. But which metric should you track? And how can you calculate and improve them? Have a look at our dedicated articles.","parent":0,"count":27,"filter":"raw"},"related_author_id":10619,"right_sidebar_call_to_action_id":"","right_sidebar_call_to_action_alt":"","date_modified":"29/07/2026","og_image":false,"og_title":"","og_description":"","_taxonomies":{"category":[{"id":374,"name":"AR metrics","slug":"ar-metrics","description":"Tracking your receivable KPIs is crucial to mesure the efficiency of your cash collection. But which metric should you track? And how can you calculate and improve them? Have a look at our dedicated articles.","parent":null}],"translation_priority":[{"id":11,"name":"Optional","slug":"optional","description":"","parent":null}]}},"publishedAt":"March 3, 2022","publishedAtIso":"2022-03-03T01:00:00Z","modifiedAtIso":"$undefined"},{"title":"DSO: 5 Essential Steps to reduce Your DSO","description":"Explore 5 key steps you should follow to lower your DSO","image":"https://cms.upflow.dev.3codes.io/wp-content/uploads/2021/11/ar-performance-reduce-dso.png","imageAlt":"","fields":{"link":"/blog/reduce-dso/reduce-dso","_taxonomies":{"article_type":[{"id":374,"name":"AR metrics","slug":"ar-metrics","description":""}]},"author":{"name":"Alexandre Antoine","image":"https://cms.upflow.dev.3codes.io/wp-content/uploads/2026/07/9-1.png","description":"

\n","position":"Finance Director at Upflow","slug":"alex-finance-director"}},"acf":{"seo_title":"DSO: 5 Essential Steps to reduce Your DSO","seo_description":"Adopt these best practices in your A/R collection processes to lower your DSO and improve your cash flow management and liquidity","body":[{"acf_fc_layout":"paragraph","content":"

DSO – for Days Sales Outstanding – is an important KPI to keep an eye on especially in fast-growing SaaS companies. It represents the number of days it takes your invoices to be paid by your clients. It, therefore, has an influence on your company’s cash flow. It also signals the efficiency of your cash management process.

\n"},{"acf_fc_layout":"paragraph","content":"

There are 2 ways to calculate Days Sales Outstanding:

\n"},{"acf_fc_layout":"ordered_list","items":[{"text":"The simple method: a simple formula that calculates the average number of days it takes for your customers to pay your company."},{"text":"The countback method: a more complicated and accurate way to find your DSO, where you go back month-by-month over a period of time."}]},{"acf_fc_layout":"paragraph","content":"

Need help calculating your DSO? Check out our free spreadsheet that helps you calculate, interpret and reduce it!

\n"},{"acf_fc_layout":"hubspot_cta","id":"3f44d79a-b614-418a-811b-1384592bac47","alt":"calculate dso"},{"acf_fc_layout":"paragraph","content":"

The “3rd option” to calculate your Days Sales Outstanding would be to use automated software: it gives you accurate, real-time data. That’s what most CFO and finance professionals tend to use.

\n"},{"acf_fc_layout":"paragraph","content":"

For more information about calculating your DSO check out our step-by-step guide to calculating Days Sales Outstanding

\n"},{"acf_fc_layout":"paragraph","content":"

Regardless of how you calculate your DSO, one thing is important, maintaining a lower DSO is usually better for the health of the company. A low DSO means that you are getting paid quickly by your customers. It’s also a good indicator of the efficiency of your accounts receivable process. However, it’s important not to become fixated on lowering DSO by implementing payment policies that are too strict. This could do more harm than good. On the other hand, a high DSO can be an early warning sign that the company has cash flow problems.

\n"},{"acf_fc_layout":"paragraph","content":"

So, how can you reduce your DSO?

\n"},{"acf_fc_layout":"paragraph","content":"

What are the steps you need to take to have a low DSO while maintaining a good customer relationship?

\n"},{"acf_fc_layout":"paragraph","content":"

What Factors can affect DSO?

\n"},{"acf_fc_layout":"paragraph","content":"

What are the other KPIs you need to watch out for?

\n"},{"acf_fc_layout":"paragraph","content":"

Before you read on to find out the answers, take a moment to calculate your own DSO. You need to start somewhere and having it will give you a benchmark to work towards.

\n"},{"acf_fc_layout":"paragraph","content":"

Already have your Days Sales Outstanding? Let’s find out the 5 essential steps you must take to reduce it.

\n"},{"acf_fc_layout":"paragraph","content":"

Having a hard time computing essential A/R metrics like DSO, have a look at our free spreadsheet!

\n"},{"acf_fc_layout":"snippet_block","code":" $\"download$ "},{"acf_fc_layout":"heading","text":"1 - Maintain an efficient invoicing process","level":"h2"},{"acf_fc_layout":"paragraph","content":"

Invoicing is at the heart of every business. Without an adequate cash collection process, there is no business – everyone knows that. Your invoicing process should therefore be at the forefront of your mind when it comes to lowering your DSO.

\n"},{"acf_fc_layout":"paragraph","content":"

Ideally, you should be proactive throughout the entire billing process. That means not only sending invoices on time but in addition, setting up follow-up reminders for your team.

\n"},{"acf_fc_layout":"paragraph","content":"

Another way to reduce your DSO is to pay attention to the quality of the information you send:

\n"},{"acf_fc_layout":"bullet_list","items":[{"text":"Do your invoices come with a clear due date?"},{"text":"Are your payment terms written on each invoice?"},{"text":"Do you double-check the amount of each invoice, as well as the person it is sent to?"}]},{"acf_fc_layout":"paragraph","content":"

These might seem obvious, but these seemingly small actions can make a big difference to your Days Sales Outstanding. This is especially true if you send invoices manually and use spreadsheets to track them.

\n"},{"acf_fc_layout":"heading","text":"2 - Create a convenient payment process ","level":"h2"},{"acf_fc_layout":"paragraph","content":"

If late payments are becoming an issue for your business, it may be because it’s difficult for your customers to pay you. This will be reflected in your DSO.

\n"},{"acf_fc_layout":"paragraph","content":"

A clear, convenient payment process, on the other hand, will help you improve your DSO. The goal is to make it as easy as possible for your clients to pay you.

\n"},{"acf_fc_layout":"paragraph","content":"

This looks like:

\n"},{"acf_fc_layout":"bullet_list","items":[{"text":"Offering multiple payment methods: let your customers choose between paying you through check, bank transfer or, by using a Debit or Credit Card. Credit or Debit Card, or even by sending you a check. "},{"text":"Making sure they have the right information at the right time. As previously mentioned: checking that your client has all the necessary info to pay you is key. Make sure to include your bank details or a payment link to your invoices, as well as the due date."}]},{"acf_fc_layout":"heading","text":"3 - Incentivize early payment ","level":"h2"},{"acf_fc_layout":"paragraph","content":"

You should aim to reduce your DSO, but not at all costs: your relationship with your clients needs to be protected! Good customer service can include for instance more flexible payment terms for bigger or older clients.

\n"},{"acf_fc_layout":"paragraph","content":"

Another way to improve your DSO while improving your customer relationships is to offer them rewards for early payment. Since upfront payments will allow you to improve your Accounts Receivable and your cash flow, it can be worth investigating ways to incentivize it.

\n"},{"acf_fc_layout":"paragraph","content":"

This can look like offering them a 5 or 10% discount. The incentive amount should vary based on how much the extra liquidity is worth to you. You could also include a bonus (service or product) to customers who pay before an invoice is due.

\n"},{"acf_fc_layout":"paragraph","content":"

Whichever option you decide on, make sure your payment terms are clearly stated on your invoices! And remember that rewarding customers for upfront payment or early payment is better than penalizing them for past due invoices.

\n"},{"acf_fc_layout":"heading","text":"4 - Automate your Accounts Receivable Process","level":"h2"},{"acf_fc_layout":"paragraph","content":"

If you want to lower your Days Sales Outstanding, you need to take a proactive approach to your Accounts Receivable process. While that is possible to achieve by using spreadsheets and a team of dedicated people to follow up on unpaid invoices, it is much simpler (and more accurate) to use account receivable software.

\n"},{"acf_fc_layout":"paragraph","content":"

An A/R software allows you to create efficient workflows for your billing process. Invoices can be sent automatically and you can schedule personalized reminders to follow up on them. Since part of the process uses automation, you can then focus your energy on high-risk accounts with outstanding amounts of more than 30-60 days. what will make a bigger impact – like focusing on improving your DSO.

\n"},{"acf_fc_layout":"paragraph","content":"

Upflow is an accounts receivable solution that will help you to set up the previous steps easily. It offers real-time information about invoices as well as different payment options for your customers.

\n"},{"acf_fc_layout":"paragraph","content":"

If you’re serious about reducing your DSO, you’ll at least want to have a look! Check out our Live Product Tour here!

\n"},{"acf_fc_layout":"heading","text":"5 - Track other important metrics to reduce DSO","level":"h2"},{"acf_fc_layout":"paragraph","content":"

While your DSO is one of the most important metrics to track, it is by no means the only metric you should concentrate on. If you want to improve your accounts receivable process at large, you’ll also want to look at:

\n"},{"acf_fc_layout":"bullet_list","items":[{"text":"Your A/R aging reports: a visual representation of your A/R gathered by time-to-due date. Focus on the 30-60 overdue days bracket in particular as it is a strong indicator of an escalating cash collection problem."},{"text":"Your Collection Effectiveness Index:(CEI) measures your ability to get funds from your customers at a given time. The closer it is to 100%, the better it is - try to keep it above 80% at all times!"},{"text":"Your Billing Cohorts: this metric ties it all together by analyzing the percentage of revenue your company actually collects over time. You can see if your cash collection processes are working and how they evolve."}]},{"acf_fc_layout":"paragraph","content":"

Improving these other metrics will also lead to improving your Days Sales Outstanding as well as your cash flow- they are all connected!

\n"},{"acf_fc_layout":"paragraph","content":"

Good news, we offer a free spreadsheet to calculate these metrics!

\n"},{"acf_fc_layout":"snippet_block","code":" $\"download$ "},{"acf_fc_layout":"paragraph","content":"

There are 5 keys to improving your DSO:

\n"},{"acf_fc_layout":"bullet_list","items":[{"text":"Maintain an efficient invoicing process,"},{"text":"Create a convenient payment process,"},{"text":"Incentivize early payment,"},{"text":"Automate your Accounts Receivable process,"},{"text":"Look at other metrics. Lowering your DSO won't happen overnight, it's a long-term practice that requires adapting your internal A/R and invoicing processes. Now that you’ve read this comprehensive article, keep the momentum going by being proactive and testing these different strategies."}]}],"primary_category":{"term_id":393,"name":"Reduce DSO","slug":"reduce-dso","term_group":0,"term_taxonomy_id":116,"taxonomy":"category","description":"DSO is a crucial metric to track: it indicates how long it takes you to get paid by your clients. The closer it is to your payment terms, the better. Here you'll find articles and resources to help you reduce your DSO and get your business on the right track.","parent":0,"count":9,"filter":"raw"},"related_author_id":10617,"right_sidebar_call_to_action_id":"","right_sidebar_call_to_action_alt":"","date_modified":"29/07/2026","og_image":false,"og_title":"","og_description":"","canonical_mode":"auto","x_default_mode":"auto","_taxonomies":{"category":[{"id":374,"name":"AR metrics","slug":"ar-metrics","description":"Tracking your receivable KPIs is crucial to mesure the efficiency of your cash collection. But which metric should you track? And how can you calculate and improve them? Have a look at our dedicated articles.","parent":null},{"id":393,"name":"Reduce DSO","slug":"reduce-dso","description":"DSO is a crucial metric to track: it indicates how long it takes you to get paid by your clients. The closer it is to your payment terms, the better. Here you'll find articles and resources to help you reduce your DSO and get your business on the right track.","parent":null}],"translation_priority":[{"id":11,"name":"Optional","slug":"optional","description":"","parent":null}]}},"publishedAt":"November 25, 2021","publishedAtIso":"2021-11-25T01:00:00Z","modifiedAtIso":"$undefined"},{"title":"Fast-growing companies: 4 receivables KPIs you must track to scale","description":"Cash collection matters! Especially as a fast-growing or VC-backed company. Start tracking your A/R now","image":"https://cms.upflow.dev.3codes.io/wp-content/uploads/2021/09/ar-performance-ar-metrics.png","imageAlt":"","fields":{"link":"/blog/ar-metrics/ar-metrics","_taxonomies":{"article_type":[{"id":374,"name":"AR metrics","slug":"ar-metrics","description":""}]},"author":{"name":"Alexandre Antoine","image":"https://cms.upflow.dev.3codes.io/wp-content/uploads/2026/07/9-1.png","description":"

\n","position":"Finance Director at Upflow","slug":"alex-finance-director"}},"acf":{"seo_title":"Fast-growing companies: 4 receivables KPIs you must track to scale","seo_description":"Discover insights from finance leaders at Salesloft and SafeGraph about 4 KPIs you must track to scale: DSO, aging balance, CEI and billing cohorts.","body":[{"acf_fc_layout":"paragraph","content":"

Most companies acknowledge the fact that cash is the fuel that powers businesses. But few prioritize effective cash collection. And many are behind when it comes to keeping careful track of whether invoices are paid on time – if at all. This results in businesses struggling to pay their expenses and suffering from cash flow issues.

\n"},{"acf_fc_layout":"paragraph","content":"

Cash collection matters! Especially as a fast-growing or VC-backed company.

\n"},{"acf_fc_layout":"paragraph","content":"

Upflow co-hosted a webinar with top-notch finance operators on this topic. Keep reading to learn more about key performance indicators as well as automation tools you can use to improve your liquidity levels and stick to high ratios.

\n"},{"acf_fc_layout":"paragraph","content":"

In this article, you will find the main takeaways from this productive session. Many thanks to Art Nasser, Finance & Accounting Manager at SafeGraph, Chad Wonderling, SVP, Chief Accounting Officer at Salesloft, and our very own Head of Operations here at Upflow: Côme Chevallier!

\n"},{"acf_fc_layout":"paragraph","content":"

Need help downloading your top A/R metrics? Download our free spreadsheet!

\n"},{"acf_fc_layout":"snippet_block","code":" $\"download$ "},{"acf_fc_layout":"heading","text":"Why your company should closely track Accounts Receivables (A/R) ","level":"h2"},{"acf_fc_layout":"paragraph","content":"

Accounts receivable are an asset on your balance sheet, but they accrue from revenue that has yet to be collected. You can generate a lot of revenue in net credit sales. But if cash does not follow, is it truly working well? That is, of course, a rhetorical question.

\n"},{"acf_fc_layout":"paragraph","content":"

“Cash is the lifeblood of your company on a daily basis”, said Chad Wonderling from Salesloft during the webinar. “Doing our daily cash reconciliation is the company brushing its teeth in the morning, it is just a form of good hygiene”, he says. “We have to understand where the money is coming from and where it is going on the other side”, “no matter what our cash position is, and regardless of the latest funding round we had X number of days or months ago”.

\n"},{"acf_fc_layout":"paragraph","content":"

Strong collections, cash inflows, and receivable inflows management are also beneficial to alleviate pressure on your organization. Maybe you went over on your Google Ads by a substantial amount, maybe bonuses were higher than expected. Before you know it, there is a hit on the P&L (profit and loss), describes Art Nasser from SafeGraph. “Investors are paying more attention than ever to cash efficiency or starting to add other metrics to measure how you’re doing in terms of collecting”, he says. Nasser considers that internal monthly meetings or quarterly board meetings can be beneficial to stronger collections.

\n"},{"acf_fc_layout":"paragraph","content":"

At its core, cash collection is a business topic and shouldn’t be the sole responsibility of the finance team. After all, cash pays salaries, rents, investment, marketing campaigns, and the such. How do we rally the troops around this issue? For Chad Wonderling, who works for a sales organization developing software for salespeople in the revenue life cycle, the attention put on sales should not distract from the collection of those contracts. “We can never make that assumption”, he says.

\n"},{"acf_fc_layout":"paragraph","content":"

It is important to educate your revenue teams and build best practices to ensure these topics are well understood and put forward. By celebrating the annual upfront deals more than the average deals and total receivables, explains Art Nasser from a geospatial data organization, companies can “fire people up”.

\n"},{"acf_fc_layout":"paragraph","content":"

The average employee who is not a finance & accounting professional might not care much for DSO (days sales outstanding), cash inflows, cash outflows, and other accounts receivable metrics. But “incentivizing commissions for upfront deals and tying those to cash” is crucial to make everyone in the company care.

\n"},{"acf_fc_layout":"paragraph","content":"

When you’re in a fast-growing or VC-backed company, you might be tempted to think that cash is less of an issue. Either because you just raised money, or because you are closing so many deals at once, detailed Côme Chevallier from Upflow. But this whole webinar aims at showing that is not true!

\n"},{"acf_fc_layout":"heading","text":"The true cost of late A/R","level":"h2"},{"acf_fc_layout":"paragraph","content":"

Late accounts receivable usually hide a deeper issue with the product or other underlying and unresolved customer disputes. Chad Wonderling from Salesloft sees it as a “philosophical opportunity” to enhance the adoption of his product. “When we think of collections, we think of it as slapping the customer on the wrist, but really we can also twist the narrative to be about overall customer experience”, he explains.

\n"},{"acf_fc_layout":"paragraph","content":"

Bad debt detected too late hinders future growth. It can have a crushing effect on your business. For instance, let’s say you have an invoice of 50K that goes into bad debt. If your margin is 33%, you will need to sell twice as much, only to zero out the cost you lost! “Debt can certainly have a big domino effect on the business”, says Chad Wonderling.

\n"},{"acf_fc_layout":"paragraph","content":"

That is why you need scalable indicators to detect any issues or processes to change. The ultimate goal? Creating feedback loops involving all relevant teams.

\n"},{"acf_fc_layout":"heading","text":"Four KPIs your fast-growing company should track to optimize cash collection","level":"h2"},{"acf_fc_layout":"heading","text":"1- A/R aging report ","level":"h3"},{"acf_fc_layout":"paragraph","content":"

First, what is an A/R aging report? It is a visualization of the accounts receivable, grouped by time-to-due dates residing in several buckets, i.e. 30 days, 30-to-60 days, etc. It shows you the current A/R health of your company and gives you insight about your accounts receivable turnover ratio.

\n"},{"acf_fc_layout":"paragraph","content":"

Measuring A/R aging weekly helps you detect anomalies in your payment terms and anticipate risks. The data is usually available from your billing or accounting tool. It lets you look at both absolute and relative figures. The 30-60-day overdue bucket is the most common indicator of escalating cash collections.

\n"},{"acf_fc_layout":"paragraph","content":"

“At SafeGraph, we use Quickbooks online and have the A/R aging auto-sent to us every Monday”. “I recommend looking at it on a customer level because that’s where the stories, the whys, come in,” Art said during the webinar. A great way to attach a name and a face to the balances that you are passed on. The data visualization aspect makes it easy for everyone on your finance and accounting teams to understand and manage risk factors.

\n"},{"acf_fc_layout":"paragraph","content":"

SafeGraph uses Upflow to help in that collection process. At Upflow, we integrate with the tools in your financial stack in one click to help your B2B finance and business teams collect customer payments effortlessly.

\n"},{"acf_fc_layout":"paragraph","content":"

Before the SafeGraph customer support team enters in, their customers have already received Upflow’s automated courtesy that the bill is becoming due. They have also received two automated reminders from the finance teams. “There is almost always a story there”, says Art Nasser. Either the customer is facing a cash crush himself, or there was never a good market fit there…

\n"},{"acf_fc_layout":"paragraph","content":"

“You would be shocked at the amount of product feedback that billing managers, AR analysts, controllers, whoever is overseeing it, the amount of feedback get on the product”, he said. Communication and awareness are key to ensure the involvement of all teams within the organization, sums up Chad Wonderling.

\n"},{"acf_fc_layout":"heading","text":"2- Day sales outstanding (DSO)","level":"h3"},{"acf_fc_layout":"paragraph","content":"

The DSO is the average time it takes your company to convert one dollar of turnover into one dollar of cash in your bank account. Why does measuring DSO matter? It gives you a measure of your collections speed, which you can then compare to your payment turns to detect abnormalities within the peer group.

\n"},{"acf_fc_layout":"paragraph","content":"

Here are two ways to calculate your DSO:

\n"},{"acf_fc_layout":"ordered_list","items":[{"text":"The accounting method: you divide your A/R by the sales in a given time and you multiply by the number of days. Very easy to calculate, this formula is subject to seasonality and timeframe inaccuracies, so proceed with caution!"},{"text":"The countback method: you look at your stock of A/R and count back the number of days of sales that would be needed to zero out that stock. It might be harder to put in place If your tools are not automating that calculation. But it will show more accurate numbers."}]},{"acf_fc_layout":"paragraph","content":"

Need more help calculating your DSO? Have a look at our free spreadsheet that calculates it and helps you interpret and improve it!

\n"},{"acf_fc_layout":"paragraph","content":"

“As you expand as a company, you might want to consider segmenting your best possible DSO based on your customers. The enterprise customers won’t give you the same results as your emerging size customers”, says Chad Wonderling. While the DSO is relative and industry-based, it is safe to say that above 50 days, the number is bad or worrying. A high DSO is never a good sign.

\n"},{"acf_fc_layout":"paragraph","content":"

Check out Upflow’s DSO cheat sheet to understand how DSO moves when receivable and sales move in your company. Stick to one method and use it regularly. From there, you will be able to create feedback loops, collection policies, and action plans with your team.

\n"},{"acf_fc_layout":"paragraph","content":"

Our in-house A/R software can help you lower your DSO efficiently by automating your collection process and help you get paid faster.

\n"},{"acf_fc_layout":"hubspot_cta","id":"5dce7b06-14d0-4a82-a83c-2c25ba953ea2","alt":"Discover Plan"},{"acf_fc_layout":"heading","text":"3- Collection effectiveness index (CEI)","level":"h3"},{"acf_fc_layout":"paragraph","content":"

The collection effectiveness index is the percentage of collectible A/R that are effectively collected. These CEI measures are a lesser-known, more detailed version of tracking the percentage of due or past due invoices through a period of time. The ratio trends towards 100% if all of your receivables are due at the end of a given period. It tells you if you perform well or not, whereas the DSO does not have a due and overdue A/R ratio built-in.

\n"},{"acf_fc_layout":"paragraph","content":"

Discover our tool to easily calculate your CEI:

\n"},{"acf_fc_layout":"snippet_block","code":" $\"Download$ "},{"acf_fc_layout":"heading","text":"4- Billing cohorts","level":"h3"},{"acf_fc_layout":"paragraph","content":"

This cohort analysis method is standard in software product teams and can be used for revenue and collections data as well. It allows you to calculate the percentage of revenues your company collects over time, grouped by buckets (beginning receivable: 30 days, current receivables: 60 days, etc.). This performance metric also showcases your average accounts receivable.

\n"},{"acf_fc_layout":"paragraph","content":"

Why does measuring billing cohorts matter? Because they tie everything together. If you read them horizontally, they will tell you if the cash collection strategies are working. Vertically, they tell if you improved over time. Predictability is key for finance teams.

\n"},{"acf_fc_layout":"paragraph","content":"

“Working by data cohorts removes some of the noise from A/R and A/R aging numbers”, says Art Nasser. That system of accounts receivable management allows you to look at how you are doing with invoices sent on any given month. It also helps to forecast cash and to know how the company is doing in terms of total credit sales, bottom line, and collecting.

\n"},{"acf_fc_layout":"paragraph","content":"

“We took the billing codework data, the raw data that we were able to download directly from Upflow and I simply charted it out”, he explains. He drew a lesson from the chart: get somebody focusing on A/R.

\n"},{"acf_fc_layout":"paragraph","content":"

“At that time, we had an outsourced finance team, and nobody was dedicated or spending enough time on collection. We were not collecting anywhere from 60, 90 days, which was not very sustainable. We were swimming in manual collections. That’s when I turned on Upflow’s templates and automated reminders. I can promise you that an automated and scheduled collections workflow will absolutely improve these trend lines. It allowed us to stop all the bleeding in invoices over 60 and 90 days. We were even able to improve our number of receivables within 30 days, which is pretty incredible given the number of enterprise customers we serve… It has been a huge boost for us”, he said.

\n"},{"acf_fc_layout":"snippet_block","code":" $\"download$ "},{"acf_fc_layout":"paragraph","content":"

To conclude, how can CFOs and financial controllers help with collection issues?

\n"},{"acf_fc_layout":"bullet_list","items":[{"text":"Bring finance into the process sooner"},{"text":"Structure the commission incentives for the salespeople to be cash upfront rich "},{"text":"Have the company’s process and procedures in place before that sale is closed"},{"text":"Automate your messages: your customers will respect you more for it"},{"text":"Use the best automation tools and key metrics to create that stickiness with the customer and enhance cash flows"}]},{"acf_fc_layout":"snippet_block","code":" $\"New$ "}],"primary_category":{"term_id":374,"name":"AR metrics","slug":"ar-metrics","term_group":0,"term_taxonomy_id":97,"taxonomy":"category","description":"Tracking your receivable KPIs is crucial to mesure the efficiency of your cash collection. But which metric should you track? And how can you calculate and improve them? Have a look at our dedicated articles.","parent":0,"count":27,"filter":"raw"},"related_author_id":10617,"right_sidebar_call_to_action_id":"","right_sidebar_call_to_action_alt":"","date_modified":"29/07/2026","og_image":false,"og_title":"","og_description":"","canonical_mode":"auto","x_default_mode":"auto","_taxonomies":{"category":[{"id":374,"name":"AR metrics","slug":"ar-metrics","description":"Tracking your receivable KPIs is crucial to mesure the efficiency of your cash collection. But which metric should you track? And how can you calculate and improve them? Have a look at our dedicated articles.","parent":null}],"translation_priority":[{"id":11,"name":"Optional","slug":"optional","description":"","parent":null}]}},"publishedAt":"September 29, 2021","publishedAtIso":"2021-09-29T02:00:00Z","modifiedAtIso":"$undefined"},{"title":"Cash Collection Stats You Should Share With Investors","description":"Here’s why you need to share cash collection metrics with investors.","image":"https://cms.upflow.dev.3codes.io/wp-content/uploads/2021/06/cfo-accounts-receivable-metrics.png","imageAlt":"","fields":{"link":"/blog/ar-metrics/cfo-accounts-receivable-metrics","_taxonomies":{"article_type":[{"id":374,"name":"AR metrics","slug":"ar-metrics","description":""}]},"author":{"name":"Alex Louisy","image":"https://cms.upflow.dev.3codes.io/wp-content/uploads/2026/07/7.png","description":"$66","position":"Co-founder and CEO of Upflow","slug":"alexandre"}},"acf":{"seo_title":"Cash Collection Stats You Should Share With Investors","seo_description":"Which accounts receivable metrics do you share with investors? Here’s why you need to share information about cash collection.","body":[{"acf_fc_layout":"paragraph","content":"

If you want to build a healthy, cash-driven business, you need to track more than revenues.

\n"},{"acf_fc_layout":"paragraph","content":"

You should track cash collection metrics and share them with all key stakeholders, including your internal team as well as investors and advisors.

\n"},{"acf_fc_layout":"paragraph","content":"

The reality is that revenue reports can lie. They demonstrate how many customers you have on the books and how much you’re charging each month… but they don’t say anything about how much money you actually have in the bank.

\n"},{"acf_fc_layout":"paragraph","content":"

Until now, the norm has been to report revenues to investors and other stakeholders to show off company growth. But that’s changing.

\n"},{"acf_fc_layout":"paragraph","content":"

In the near future, investors are increasingly going to want to see accounts receivable metrics to gauge your company’s cash collection efficiency and cash flow.

\n"},{"acf_fc_layout":"paragraph","content":"

So, you should be saying something about cash collection to investors.

\n"},{"acf_fc_layout":"paragraph","content":"

Here’s why — and how — to keep investors in the loop about your cash collection activity.

\n"},{"acf_fc_layout":"paragraph","content":"

Need help calculating your top A/R metrics? Have a look at our free spreadsheet.

\n"},{"acf_fc_layout":"snippet_block","code":" $\"download$ "},{"acf_fc_layout":"heading","text":"Why Account Receivable Metrics Are Important to Investors","level":"h2"},{"acf_fc_layout":"paragraph","content":"

One thing that never lies is the cash in the bank account.

\n"},{"acf_fc_layout":"paragraph","content":"

You can send an invoice anytime — and you can just as easily follow up with a credit note. In the meantime, the invoice on the books creates reported revenue that boosts your monthly recurring revenue (MRR).

\n"},{"acf_fc_layout":"paragraph","content":"

That may sound nefarious, but your MRR can be artificially inflated other ways, too, unintentionally.

\n"},{"acf_fc_layout":"paragraph","content":"

Say a customer asks to cancel their subscription, and your company’s first step in such a case is to connect them with someone on the sales team to attempt to retain them as a customer. While these conversations are happening, the customer isn’t paying, but they remain on the books as a subscription — contributing to your MRR.

\n"},{"acf_fc_layout":"paragraph","content":"

If that customer ends up canceling, that could be months of recorded revenue you never collect, skewing your MRR.

\n"},{"acf_fc_layout":"paragraph","content":"

This “flexibility” with how you report revenue-related metrics — along with an increased risk of bankruptcy after the COVID-19 crisis — is why investors are going to be asking for cash flow metrics more often.

\n"},{"acf_fc_layout":"paragraph","content":"

Revenue metrics don’t tell investors how much cash your company has in the bank, how healthy your company’s finances are or how happy your customers are with your products or service.

\n"},{"acf_fc_layout":"paragraph","content":"

Strong cash collection metrics are a sign of happy customers and healthy financial management, regardless of your rate of growth.

\n"},{"acf_fc_layout":"paragraph","content":"

In the future, it’s likely that more investors will be asking for those metrics, thus it’s advisable to include them in your pitch deck.

\n"},{"acf_fc_layout":"heading","text":"Which Account Receivable Metrics Should You Report to Investors?","level":"h2"},{"acf_fc_layout":"paragraph","content":"

You’re probably used to reporting revenue metrics like MRR, annual recurring revenue (ARR), average contract value (ACV) and customer acquisition costs (CAC).

\n"},{"acf_fc_layout":"paragraph","content":"

But which of your cash flow metrics do you want to divulge?

\n"},{"acf_fc_layout":"paragraph","content":"

Here are the accounts receivable metrics investors will want to know:

\n"},{"acf_fc_layout":"bullet_list","items":[{"text":"Cash collection ratio: Calculate this by looking at your cash collected divided by MRR — it’s the ratio of reported revenue you collect in a given month."},{"text":"Days Sales Outstanding (DSO): This is the average number of days it takes your company to collect payment on an invoice. "},{"text":"Billing cohorts: These are groups of invoices you issued within the same month. Tracking billing cohorts lets you compare your cash collection efficiency from month to month and keep an eye on trends."}]},{"acf_fc_layout":"paragraph","content":"

Keep in mind for each of these metrics that an investor will want to see not only your most recent metrics but also how they’ve evolved over time.

\n"},{"acf_fc_layout":"snippet_block","code":" $\"download$ "},{"acf_fc_layout":"heading","text":"How to Know Whether Your KPIs Are on Track","level":"h2"},{"acf_fc_layout":"paragraph","content":"

Before you share metrics with an investor, you should understand what those numbers are going to convey.

\n"},{"acf_fc_layout":"paragraph","content":"

For the key metrics above, here’s what you might aim for to share healthy finances and strong collections:

\n"},{"acf_fc_layout":"paragraph","content":"

Cash collection ratio: Aim for at least 110% cash collection ratio to give your company a longer runway. This indicates you’re actually collecting more in a month than the revenues you’re reporting.

\n"},{"acf_fc_layout":"paragraph","content":"

How do you accomplish this? You can collect more cash than the revenues you record when you get paid upfront. This means a healthy amount of cash in the bank to back up a strong MRR.

\n"},{"acf_fc_layout":"paragraph","content":"

DSO: Aim to keep your DSO at less than 30 days to keep your cash from being tied up in overdue invoices.

\n"},{"acf_fc_layout":"paragraph","content":"

Billing cohorts: As you track billing cohorts, you want to see a positive trend of more and more invoices being paid within 30 days. Ideally, 100% of your invoices should be collected within 30 days, so the closer you move toward that number, the better the trend.

\n"},{"acf_fc_layout":"paragraph","content":"

These specific numbers might vary from business to business, but this gives you an idea of what to aim for. The key is to track these metrics over the long term to keep an eye on how your cash collection is improving over time.

\n"},{"acf_fc_layout":"heading","text":"How to Stay on Top of Your Cash Flow Metrics","level":"h2"},{"acf_fc_layout":"paragraph","content":"

If you want to report an accurate picture of your company’s finances to investors, you’ll need to keep up two sets of documents.

\n"},{"acf_fc_layout":"paragraph","content":"

The first is the profit and loss statement (P&L) — the one you’re probably used to sharing. It shows the invoices you’ve issued as revenue, and the costs of running the business.

\n"},{"acf_fc_layout":"paragraph","content":"

The second is your cash flow statement. This uses the accounts receivable KPIs listed above — cash collection ratio, DSO and billing cohorts — to demonstrate your cash collection efficiency over time.

\n"},{"acf_fc_layout":"paragraph","content":"

To stay on top of these reports, you could hire someone who’s dedicated to accounts receivable to guarantee they’re focused on collections and capturing these metrics. Or you could use accounts receivable software that automates the process for you.

\n"},{"acf_fc_layout":"paragraph","content":"

At Upflow, we offer solutions for cash collection systematization and reporting. Through our system, you can set up automatic, personalized billing reminders to aid in your collections process and payment collection.

\n"},{"acf_fc_layout":"paragraph","content":"

We also help you track KPIs with simple financial reports you can easily share with your sales, finance and business development teams to keep a clear line of communication across the company.

\n"},{"acf_fc_layout":"paragraph","content":"

That makes the numbers easy to pull up when an investor asks for them. And our systematized cash collection solutions help increase your efficiency to ensure investors are happy with the numbers they see.

\n"},{"acf_fc_layout":"paragraph","content":"

Revenue reports and MRRs can be misleading for your internal teams and your investors because of the many ways you can inflate reported numbers.

\n"},{"acf_fc_layout":"paragraph","content":"

But the cash flow statement never lies.

\n"}],"primary_category":{"term_id":374,"name":"AR metrics","slug":"ar-metrics","term_group":0,"term_taxonomy_id":97,"taxonomy":"category","description":"Tracking your receivable KPIs is crucial to mesure the efficiency of your cash collection. But which metric should you track? And how can you calculate and improve them? Have a look at our dedicated articles.","parent":0,"count":27,"filter":"raw"},"related_author_id":10619,"right_sidebar_call_to_action_id":"","right_sidebar_call_to_action_alt":"","date_modified":"29/07/2026","og_image":false,"og_title":"","og_description":"","canonical_mode":"auto","x_default_mode":"auto","_taxonomies":{"category":[{"id":374,"name":"AR metrics","slug":"ar-metrics","description":"Tracking your receivable KPIs is crucial to mesure the efficiency of your cash collection. But which metric should you track? And how can you calculate and improve them? Have a look at our dedicated articles.","parent":null}],"translation_priority":[{"id":11,"name":"Optional","slug":"optional","description":"","parent":null}]}},"publishedAt":"June 8, 2021","publishedAtIso":"2021-06-08T02:00:00Z","modifiedAtIso":"$undefined"},{"title":"Billing cohorts, the best way to improve your cash collection","description":"Leverage the most useful accounts receivable dashboard template to collect late customer payments.","image":"https://cms.upflow.dev.3codes.io/wp-content/uploads/2020/07/accounts-receivable-dashboard-billing-cohorts.png","imageAlt":"","fields":{"link":"/blog/ar-metrics/accounts-receivable-dashboard-billing-cohorts","_taxonomies":{"article_type":[{"id":374,"name":"AR metrics","slug":"ar-metrics","description":""}]},"author":{"name":"Alex Louisy","image":"https://cms.upflow.dev.3codes.io/wp-content/uploads/2026/07/7.png","description":"$67","position":"Co-founder and CEO of Upflow","slug":"alexandre"}},"acf":{"seo_title":"Billing cohorts, the best way to improve your cash collection","seo_description":"Decreasing your amount of unpaid invoices first requires an understanding of how quickly you already collect payments from your customers. With our free Excel accounts receivable dashboard template, know where you stand and take action!","body":[{"acf_fc_layout":"paragraph","content":"

As a modern finance leader, you know how important it is to measure your company’s financial performance so that you can improve your financial position and better forecast future cash flows.

\n"},{"acf_fc_layout":"paragraph","content":"

When it comes to analyzing your accounts receivable and improving your cash collection, the two most important KPIs to track are:

\n"},{"acf_fc_layout":"bullet_list","items":[{"text":"Days Sales Outstanding (DSO), which measures the average number of days that it takes for your company to collect payment on invoices issued"},{"text":"what we call the “Percentage Write-Off”, which represents the relative portion of your invoices that are still unpaid more than 180 days after being issued"}]},{"acf_fc_layout":"paragraph","content":"

Why 180 days? Eventually, you’ll need to register a write-off in your accounting system when you know you won’t be able to get paid. From a general and practical standpoint, invoices still unpaid after more than 6 months are very likely to fall into this category.

\n"},{"acf_fc_layout":"paragraph","content":"

These metrics are of course highly correlated: if you have a high percentage write-off, this negatively impacts your DSO because old invoices are still outstanding.

\n"},{"acf_fc_layout":"paragraph","content":"

But they measure the impact on your business differently: having a high DSO means that you’re bankrolling your customers with essentially zero-interest loans, whereas a high percentage write-off means you are incurring a loss.

\n"},{"acf_fc_layout":"paragraph","content":"

In this article, we want to share what we think is the most useful AR dashboard to monitor and walk you through a technique to measure your percentage write-off and ensure that it decreases over time: billing cohorts.

\n"},{"acf_fc_layout":"heading","text":"What is a billing cohort?","level":"h2"},{"acf_fc_layout":"paragraph","content":"

In essence, a billing cohort tracks groups of invoices that were issued in the same month.

\n"},{"acf_fc_layout":"paragraph","content":"

The fundamental idea behind billing cohort analysis is to compare different billing cohorts with one another: for example, you may want to compare the percentage of invoices issued in May 2019 that were paid in under 30 days to those that were issued in September 2019 and that were paid within the same amount of time.

\n"},{"acf_fc_layout":"paragraph","content":"

If you’ve been improving your collection efficiency, then the percentage of invoices paid in 30 days that were issued in September should be higher than those that were issued in May.

\n"},{"acf_fc_layout":"paragraph","content":"

The best way to visualize this data is by using a 2 by 2 matrix:

\n"},{"acf_fc_layout":"image","image":"https://cms.upflow.dev.3codes.io/wp-content/uploads/2022/06/billing-cohorts-widget.png","caption":""},{"acf_fc_layout":"paragraph","content":"

Here, each row represents a different month of billing (a cohort), and each column represents the cumulative percentage of invoices that were paid within a certain time period. So here, for example, we can see that in December, we issued $31k in invoices and 89% of those were paid within 60 days of issuance.

\n"},{"acf_fc_layout":"paragraph","content":"

Of course, you should adjust time buckets based on your business and your payment terms.

\n"},{"acf_fc_layout":"heading","text":"How to read a billing cohort?","level":"h3"},{"acf_fc_layout":"paragraph","content":"

There are two ways to read a billing cohort:

\n"},{"acf_fc_layout":"bullet_list","items":[{"text":"Left-to-right: this tells you how quickly the invoices in a given month were paid. The numbers are cumulative so they'll always increase, but they should get to 100% quickly. In fact, in an ideal world, the 30-day day bucket should be at 100%."},{"text":"Bottom-to-top: this allows you to understand how the speed at which you get paid evolves over time. For example, in the example above, in August, 88% of invoices were paid within 30 days, and in March of the following year, 70% of invoices were paid within the same amount of time. This means that you're becoming less efficient at collections and that it's probably time to make some process changes."}]},{"acf_fc_layout":"paragraph","content":"

Need help calculating your top A/R metrics? Have a look at our free spreadsheet.

\n"},{"acf_fc_layout":"snippet_block","code":" $\"download$ "},{"acf_fc_layout":"heading","text":"Measuring the ROI of improving your collection efficiency","level":"h2"},{"acf_fc_layout":"paragraph","content":"

The first thing you need to do is build the billing cohort matrix of your accounts receivable. We’ve got you covered with our free discover plan! Connect your ERP or billing tool in a few clicks and see your billing cohort matrix

\n"},{"acf_fc_layout":"hubspot_cta","id":"5dce7b06-14d0-4a82-a83c-2c25ba953ea2","alt":"discover"},{"acf_fc_layout":"paragraph","content":"

Once done, look at your 180-day bucket. Even if it’s in the low single digits, this can add up to a significant amount of lost revenue (an accounts receivable cost estimator will help you understand exactly how much).

\n"},{"acf_fc_layout":"paragraph","content":"

For example, did you know that at $10m revenue, a 0.5% write-off amounts to more than $4k lost every month?

\n"},{"acf_fc_layout":"paragraph","content":"

Put differently, if you sell at a 20% margin each write-off will require you to sell 5x (revenue and cost incurred are both lost).

\n"},{"acf_fc_layout":"paragraph","content":"

Once you understand the costs, measuring ROI is easy: in the above example reducing your write-offs from 0.5% to 0.3% equates to savings of $1,500 per month or $18k per year.

\n"},{"acf_fc_layout":"paragraph","content":"

And the great news is that more often than not, simple process changes are sufficient to achieve those kinds of results.

\n"},{"acf_fc_layout":"paragraph","content":"

In summary, every B2B company should be making use of billing cohorts to measure how efficient they are at cash collection, and how that efficiency is evolving over time. That’s the first step – from there you should implement tools that are more sophisticated than spreadsheets to keep track of your unpaid invoices and follow up on them in a systematic way.

\n"},{"acf_fc_layout":"paragraph","content":"

At Upflow, we believe it’s all about automation! Our in-house A/R software can help you lower your DSO efficiently by automating your collection process and help you get paid faster. Try out our free Discover Plan by Upflow.

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