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Quality of receivables and payables

Analysis, Receivables & Payables reads each company's AR and AP aging and turns it into a view of how collectible the receivables are and how the company is paying its suppliers. The aging comes from QuickBooks Online or an imported aging file.

Receivables

• An AR quality score, with how it is computed one click away.
• Total AR, the current share, the share 30 days and older, and DSO.
• Invoice-weighted age (days since issue) and invoice-weighted past due (days past the due date), compared with terms.
• Concentration: the top five customers' share of receivables. A customer holding more than a fifth of AR lowers the score.
• Credit utilization, when customers carry credit limits.
• Aging buckets: current, under a month, one, two and three months, and older.

Payables

Total AP, DPO, payment against terms, the share overdue by more than 30 days, the top five suppliers' share, a cash conversion strip, and how the overdue share is drifting.

How DSO and DPO are calculated

• The balance is the aging at or before the month you are viewing, never a later one, net of credits.
• It is divided by revenue (for DSO) or purchases (for DPO) over the trailing complete months: three months, or twelve on the trailing-twelve-month view. Days are months times 30.44, and the window is printed beside each figure.
• Days inventory uses the same window: inventory at the month you are viewing, found by its chart-of-accounts classification, over cost of sales. The KPI library's receivable, payable and inventory days use the same figures.
• Receivables and payables include sales tax, while revenue and purchases do not. This is deliberate: it is how a lender or investor would work DSO out from the statements, so the figure can be checked against them.
• Purchases are cost of sales, plus the change in inventory, plus operating expenses less depreciation and payroll, plus capital additions. Where one of those cannot be observed for the window, DPO falls back towards total expenses and says so.
• A trend point above 730 days is withheld and counted rather than drawn.

Credits and invoice detail

Unapplied credits are netted against the oldest invoices before ages are weighted, and the netted share is shown. When more than a quarter of the balance is netted, the figure is marked as less reliable and the fix, applying the payments in QuickBooks, is named. Invoice-weighted measures need invoice-level aging; with a summary aging, such as some imported files, they are hidden rather than estimated.

Working capital days

The working capital exhibit, in Analysis and report packages, shows DSO, days inventory, DPO and the cash conversion cycle. Any term that cannot be measured is shown as withheld, with the reason.

Tying to the balance sheet

In the Close Workbench, the AR and AP accounts are compared with their agings. A difference within 50 cents signs itself off. An aging from an earlier month is marked stale and never signs itself off.

For a group

On a consolidated view, each member's receivables and payables are translated at the closing rate and combined by customer or supplier name.

More in Analysis

• Price, volume and mix
• Customer and product profitability
• Segment reporting
• Breakeven analysis
• Quality of revenue and the customer bridge

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