While the executives want to cut through the surplus data and have a strategic overview of end-to-end receivables performance, they also want to adopt fast and instantly responsive dashboard machinery that empowers them with agility to respond to strategic business needs and take timely course corrective actions. This is what an ideal dashboard for a finance executive looks like.

Days Deduction Outstanding Monthly Trend Report

Customer deductions continue to plague companies across industries selling through multiple distribution channels. Irrespective of their varying nomenclature as deductions, chargebacks or short pays, the results are always the same ? erosion of the company?s bottom line. In order to keep a check on how well or poorly the deductions team is handling the swelling volume of deductions, executives need to keep tabs on the growth or decay of days deduction outstanding over a period of time. Key Metric Captured: The key metric captured in this report is Days Deduction Outstanding. It illustrates how well or how poorly a company is managing its deductions. It is calculated by dividing the number of open deductions by the average value of deductions incurred over the last month. Why is it essential for an executive dashboard: While deductions might occur for n number of reasons, it is essential for an executive to know how fast the A/R team is able to process these deductions and add dollars to the bottom line based on the validity of the deduction. Based on the monthly trend of DDO, the executive can decide on any requisite corrective course of action that needs to be taken for maintaining the DDO at par with the industry standards, if not better.

Total Open A/R by Segment – Monthly Report

While implementing intelligent tactics to ?get paid? early and execute different collections and cash application strategies to apply the cash faster and close the open invoices without delay, the executive still struggles to have a holistic view of the total open A/R according to different customer segments. Many companies use risk categories or geographical classifications as customer segments. However, the most ideal and vital segmentation of customer database would be in terms of dollar value, risk class, and nationality. Hence, an executive dashboard should definitely contain a report that illustrates the total open amount for all the high-risk customers and high dollar accounts customers. Why is it essential for an executive dashboard: Usually, in order to understand the total open A/R, executives ask for different reports including: –

• Total open A/R by risk category
• Total open A/R by the dollar value of accounts
• Total open A/R based on geography

Now, they will have to sift through each of these reports, analyze and then make accurate inferences from the surplus data. This re-work of analysis and drawing accurate implications based on the existing reports that had been initially made by capturing the standing data defeats the entire purpose of the dashboard and reporting of cutting through surplus information and getting a clear and concise picture of total open A/R. An ideal executive dashboard should instead consist of a report that enlists the total open A/R for high-risk accounts, high dollar accounts as well as any other necessary customer segment that might have a direct and most importantly a colossal impact on the company?s bottom line. Taking a note on the crests and troughs of this report would help the finance executives monitor the growth or decay in the total open A/R for different customer segments and make accurate decisions to improve the conditions for each of these accounts.

Day Sales Outstanding- Monthly Report

Determining the day’s sales outstanding is an important tool for measuring the liquidity of the company?s current assets. Due to the high importance of cash in operating a business, it is in the best interest of the company to collect remaining receivable balances as quickly as possible. In order to monitor the wellness of the health of the collection of the accounts receivable team, it is imperative to monitor the rise and fall of this metric across months. It is also essential for an executive to note that the DSO for the company stays below the industrial DSO standards. Key Metric Captured: As the name suggests, the key metric captured is Day Sales Outstanding. Days Sales Outstanding (DSO) represents the average number of days it takes credit sales to be converted into cash, or when a company?s accounts receivable can be collected. DSO can be calculated by dividing the total accounts receivable during a certain period of time by the total net credit sales. This number will then be multiplied the number of days in the period of time. To determine how many days it would take a company?s accounts receivable to be realized as cash, the following formula is used: DSO = Accounts receivable / Net Credit Sales X Number of Days The period of time used to measure DSO can be on a monthly, quarterly, or annual basis. If the result has a low DSO, then it means that the business takes fewer days to collect the receivables. On the other hand, a high DSO entails that it takes more days to collect receivables. In turn, a high DSO may lead to cash flow problems in the long run. Why is it essential for an executive dashboard: Days sales outstanding can vary from month to month, and over the course of a year with a company’s seasonal business cycle. Essentially, when analyzing the performance of the accounts receivable team of the company, DSO is a major consideration. If DSO is getting longer, customers are taking longer to pay their bills, which may be a warning that customers are dissatisfied with the company’s product or service, or that sales are being made to customers that are less credit-worthy, or that salespeople have to offer longer payment terms in order to generate sales. The monthly trend report depicting the increase or decrease of DSO of the company over months empowers the executives with agility to proactively spot any ?increasing-DSO? trend and take well-timed, accurate rectifying measures to prevent any future hazardous effect on company?s bottom line. Hence, this report is a must-have for an executive?s dashboard.

Cash Projection Report for Next 7 Weeks

Accounts Receivable has a great impact on a company?s cash flow. Therefore, it is very important for finance executives to forecast receivables. Becoming involved with cash management and forecasting cash flow adds value to the organization. The cash projection report is a part of the Cashflow forecasting that is critical in maintaining or improving the financial stability of an enterprise. It aims to provide a business with an estimate of incoming and outgoing cash over the course of a given time. Usually, conducted by reporting teams with an intention to determine the expected income and costs that the business will face over the time period specified in the forecast. Why is it essential for an executive dashboard: For most organizations, the objective of cash projection is to determine when cash shortage or excess will occur during the year hence informing the executives when to transfer funds to or from short-term investments. Rather than waiting until the accounting staff realizes there isn?t enough cash to cover that week?s checks, a cash projection gives management the ability to anticipate this need, so they can be proactive rather than reactive. Another benefit of cash projection is to not only anticipate when to transfer funds but also to determine what is causing an excess or shortage. Is it due to timing, lower-than-expected registration for the annual conference, slow payment of dues, or worse yet the loss of members, etc.? The key reasons why cash projection reports are essential for an executive dashboard is as follows: –

• Identify potential shortfalls in cash balances in advance?considering cash flow forecast as an “early warning system”.
• Make sure that the business can afford to pay suppliers and employees. Suppliers who don’t get paid will soon stop supplying the business.
• Spot problems with customer payments?preparing the forecast encourages the business to look at how quickly customers are paying their debts.
• As an important discipline of financial planning?the cash flow forecast is an important management process, similar to preparing business budgets.
• External stakeholders such as banks may require regular forecast. Certainly, if the business has a bank loan, the bank will want to look at the cash flow forecast at regular intervals.

Hence, it is one of the most important must-haves for the executive dashboard. It?s no secret that collecting accounts receivable has its fair share of unique challenges. However, overcoming these challenges becomes systematic once the executives find an effective dashboard to track the metrics using real-time reports. This system should organize, categorize, and report the surplus data so that tracking important metrics and forecasting cash flow is automatic. With such a system in place, finance executives can be proactive in reforming their accounts receivable.