Configure Calculation of Days of Sales Open (DSO)

This document explains how you set up the rules for calculating Days of Sales Open (DSO) for credit monitoring purposes.

Outcome

The settings are used to:

  • Calculate the DSO values by comparing trends in sales with trends in the customer’s payment behavior
  • Summarize the DSO values as a DSO action code.

The (CSYPAR) file for DSO values is updated.

Before you start

  • The company must have a well-defined policy for managing customer credit risk.

Parameters to Set

Program ID/Panel Field The field indicates …
(RMS900/E) Number of periods – sales … the number of periods used when calculating total sales. Total sales being the denominator in the DSO formula, it is then used when calculating the DSO value.
(RMS900/E) Number of periods – change

… The field defines how many periods should be compared when there is a change in sales and the DSO value.

The number entered thus specifies from which period the calculation of DSO and sales should be performed, counting backwards from the period defined in ‘Credit Monitoring. Calculate DSO’ (RMS400/E).

For the calculation to be as accurate as possible, it should include more than just a few periods. Factors like season-related changes should also be taken into account when deciding how many periods are to be used for the comparison.

If the number of periods is 3, for instance, the following would happen:

  • An average of the DSO value and average sales for the past three periods is calculated.
  • The average generated is compared to the values of the period entered in (RMS400).

The percent change is then compared to the percentage defined in the Change sales value in percentage field (see below).

(RMS900/E) Change sales value in percentage … the limit for when a change in sales is reported, expressed as a percentage with up to three decimals.
(RMS900/E) Change DSO values in percentage … the limit for when a change in the DSO values is reported, expressed as a percentage with up to three decimals.

Follow These Steps

  1. Start ‘Settings – DSO Calculation’ (RMS900/B).

  2. Enter the company or division ID. Click New.

  3. On the E panel, enter the number of periods for sales and change respectively (required).

  4. Enter percentages for change sales value and change DSO value (optional). Press Enter.

Related topics