Glossary
Days sales outstanding
Days sales outstanding is the average time it takes to collect an invoice, calculated as receivables divided by revenue, times the days in the period. It measures your own collections process at least as much as it measures your customers. Terms of thirty days and a figure of fifty-two says the problem is at your end, in invoices going out late or disputes nobody chased.
01
What the number says about your own billing
Monthly on the review, because it depends on the close. On the weekly Scorecard the rows that move it are cash collected, invoices sent within a day of the work finishing, and receivables over sixty days. That last one is a short list of names, not a statistic, and it is the row that produces phone calls on a Monday afternoon.
Collections is the least glamorous part of the business and usually the cheapest place to find cash. Ten days off the figure at two million dollars of revenue puts roughly fifty-five thousand dollars back in the bank without selling anything. The number can also be flattered by writing off old balances, so read it beside the aging list rather than alone.
Worked example: An industrial supplier had terms of thirty days and a figure of fifty-eight. Half the gap was invoices leaving the office up to nine days after delivery, because billing ran as a Friday batch. Moving to daily invoicing and giving the receivables over sixty days row a named owner brought it down to thirty-nine in a single quarter.
Sources: klipfolio.com/kpis/financial; Principles of Finance 2e, section 19.4, OpenStax
Cash conversion cycle
The cash conversion cycle counts the days between paying for something and being paid for it: inventory days plus receivable days, less payable days.
02Lagging indicator
A lagging indicator reports a result after the period that produced it has closed: revenue, gross margin, employee turnover, satisfaction scores.
03Metric owner
A metric owner is the single person who answers for a row every week, which is not the same as the person who happens to have access to the report.
04KPI examples by department: sales, ops, finance, HR
Concrete KPI examples for each department in a small company, tagged leading or lagging and weekly or monthly, to help you build a Scorecard that works.
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