Setting DSO target for Cash Collection
What if my director said to me, “I want you to achieve only 70 Days Sales Outstanding for this coming month September 2005.” How then do I calculate the cash required to achieve 70 DSO?
Illustration:
Assuming that for August 2005’s DSO is 75 days and the scenario is as below:
| August’05 | 31 days | Sales value $1,500,000 | |
| July’05 | 31 days | Sales value $1,000,000 | |
| June’05 | 13 days | Sales value $ 650,000 | (out of total sales of $1,500,000 x 13/30 ) |
| Total | 75 days | $3,150,000 | Receivables |
FCCA,CA(MIA)with more than 26 years of post-qualifying working experiences. Previous working stints with one of the big accounting four, Regional GFC & Group Treasurer in a group of Malaysian and Group CFO in Singapore public listed concern.
Also author to another very popular free educational accounting cum finance blog: http://basiccollegeaccounting.com under the branding of College Accounting Coach.
Recent Comments