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Four Must-Have Metrics For Every A/R Executive Dashboard

Introduction

A/R executives have to analyze a huge amount of data to get an overview of their receivables performance. The lack of visibility into data at the right time can make it increasingly difficult for executives to safeguard cash flow. An informed dashboard help leaders to overcome this challenge by translating critical metrics into measurable outcomes, empowering them to make insight-business decisions.
Gartners’ Top Priorities for Finance Leaders 2022
It's significant for A/R leaders to also reflect on this objective and take necessary measures to implement such technologies into their ongoing processes to create a working capital impact in CFO’s office. This blog highlights 4 Metric level dashboards that an A/R analyst should monitor daily to get a bird’s eye view of the entire account receivable process.

Top 4 Metrics Every A/R Executive Dashboard Should Highlight

1. Day Sales Outstanding(DSO)

To maintain the working capital required to run critical business operations, it is in the company’s best interest to collect the remaining receivable balance as quickly as possible. As a result, the A/R leader needs to monitor the payment trends associated with every account and ensure that the company’s DSO is kept at the bare minimum.

The DSO represents the average number of days it takes for credit to be converted into cash. The larger the number, the more significant its impact on the working capital.

DSO is calculated as:
Accounts receivable / Net Credit Sales X Number of Days

The monthly DSO trend report would enable executives to proactively spot any “increasing-DSO” trend and suggest accurate rectifying measures to safeguard cash flow.

Days Sales Outstanding- Monthly Trend

2. Days Deductions Outstanding(DDO)

Customer deductions continue to be a business challenge in various industries that operate through different distribution channels. And tracking the deductions has often been very difficult, which ultimately affected the company’s bottom line. The DDO helps executives keep a tab on the volume of deductions that remain unresolved over a period of time.

It is calculated by dividing the number of open deductions by the average deductions incurred over the last month.

Visibility over this metric would enable the executive to identify a course correction strategy for faster dispute resolution and keep up with the industry standards.

Days Deduction Outstanding- Monthly Trend

3. Total Open A/R by Segmentation

Despite implementing intelligent cash collection strategies, most leaders find it challenging to have a holistic view of the total open A/R. An executive dashboard should contain a report that illustrates the total open amount for the different customer segments based on their risk levels, the dollar value, and geographies.

This report will help A/R executives to proactively track the fluctuation in the total open A/R for various customer segments, allowing their team to follow up with high-risk accounts faster.

Total Open A/R by segment - Monthly

4. Cash Projection Report

Forecasting of receivables is imperative for every business to balance the liquidity in the company. CFOs are more interested to learn about the expected income and costs incurred by a business. This turns out to be a great opportunity for A/R leaders to contribute to the forward-looking objectives in the CFO’s office.

The cash projection report should highlight areas that-

  • Can forecast potential shortfalls in cash balances.
  • Make sure that the business can afford to pay suppliers and employees.
  • Spot irregularities in customer payments
  • Share the information with external stakeholders such as banks requiring periodic forecasts.
Cash Projection report for next 7 weeks

Conclusion

Finance and A/R executives can effortlessly steer their A/R processes. With the four key metrics as part of the executive dashboard, A/R leaders can increase efficiency across various O2C processes and collect faster to minimize risk and improve revenue growth.

Learn about a few additional metrics recommended by The Hackett Group that every A/R executive should track in an executive dashboard to make data-driven business decisions.

15 Hackett Recommended metrics to evaluate Order to Cash

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HighRadius Integrated Receivables Software Platform is the world’s only end-to-end accounts receivable software platform to lower DSO and bad-debt, automate cash posting, speed-up collections, and dispute resolution, and improve team productivity. It leverages RivanaTM Artificial Intelligence for Accounts Receivable to convert receivables faster and more effectively by using machine learning for accurate decision making across both credit and receivable processes and also enables suppliers to digitally connect with buyers via the radiusOneTM network, closing the loop from the supplier accounts receivable process to the buyer accounts payable process. Integrated Receivables have been divided into 6 distinct applications: Credit Software, EIPP Software, Cash Application Software, Deductions Software, Collections Software, and ERP Payment Gateway – covering the entire gamut of credit-to-cash.