What is in accounting, what is outstanding days?
days, outstanding sales refer to the number of working days that the company accepts to collect payment after the sale is completed. This value is the average based on monthly activities in the receivables department. As a financial metric, this is only useful for organizations that receive most of their sales against credit accounts. Companies that have cash business do not have days outstanding days because payments are accepted at the time the sale is made. Customers pay their accounts in a short time frame and improve the organization of the organization. If this value is high, it reflects how many days the company insists on collecting payment and can emphasize problems in collections or credit award. This value is then multiplied by the number of working days used for the first two values. The answer is expressed in the number of working days.
Most companies count the days when sales outstandingwithin the standard reporting process of reporting the month at the end of the month. It is important to note that this value must be used together with related metrics to get better insight into business efficiency. For example, the criteria used to provide loans have a huge impact on this metric. If the loan is granted without risk analysis, the daily sales value may be higher, as customers with credit can be able to pay immediately.
This calculation is considered one of several key tools used to measure liquidity. For companies that rely strongly on receivables, an increase in the days of outstanding sales can lead to problems with cash flows and clients delay payments. Depending on the severity of the growth and the overall economic climate, the increase can justify an increase in the contribution to poor debts.
Many companies report this value monthly and are looking for trends for six to 12 months. It is not uncommon for values to fluctuate with changes in the economic cycle or čin force. Usually it is important to set the upper and lower limits that are acceptable and ensure that the action is taken if the value falls outside these limits. Careful monitoring of this metric is usually responsible for the controller or accountant.