accounts receivable the numbers behind the numbers april2015
TRANSCRIPT
Accounts Receivable
Risk Analysisfor
Jan 2015
Copyright 2015 Mantramax Pty Ltd -
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for
Acquisitions
Due Diligence
Business Rescue
Contents
1. Introduction
2. Sample Historical Data – Target Company
3. Traditional Analysis
4. DSOB Risk Analysis
5. Comparison of Methods5. Comparison of Methods
6. Forecasting Analysis
7. Summary of results
8. Contacts
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All benchmarks in this case study use the Mantramax methodology
benchmarking Accounts Receivable against Internal Credit Terms
1. Introduction
This case study show the difference in performance/risk of Accounts Receivables in
Company X and Y with equal dataset totals.
The Age Analysis balances for each Company’s Debtors Book were calculated in a uniform manner
for consistency.
Company X & Y - Dataset Totals Feb 2014 Mar 2014 Apr 2014 May 2014 Jun 2014 Jul 2014
Total Credit Turnover incl VAT/Sales Tax R 500 000 R 500 000 R 500 000 R 500 000 R 500 000 R 500 000
Total Debtors Age Analysis R 500 000 R 750 000 R 875 000 R 875 000 R 875 000 R 875 000
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The Age Analysis balances for each Company’s Debtors Book were calculated in a uniform manner
for consistency.
Days Sales Outstanding Equal
Same AR Performance/Risk ??????
The effect of an upward or downward revenue trend in different Payment Credit Terms
on the monthly performance of Accounts Receivable is highlighted in the result
comparison. The long term effect of these trends will have a significant impact on
forecasted/budget Account Receivable balances.
2. System Data – Company X and Y
Company XTurnover incl VAT/Sales Tax Feb 2014 Mar 2014 Apr 2014 May 2014 Jun 2014 Jul 2014
15 days Invoice R 500 000 R 400 000 R 300 000 R 200 000 R 100 000 R 0
30 days Statement R 0 R 100 000 R 200 000 R 300 000 R 400 000 R 500 000
Total Credit Turnover incl VAT/Sales Tax R 500 000 R 500 000 R 500 000 R 500 000 R 500 000 R 500 000
Debtors Age Analysis as at
Month end
Feb 2014
Month end
Mar 2014
Month end
Apr 2014
Month end
May 2014
Month end
Jun 2014
Month end
Jul 2014
1 to 30 days (Current) R 500 000 R 500 000 R 500 000 R 500 000 R 500 000 R 500 000
31 to 60 days R 0 R 250 000 R 250 000 R 250 000 R 250 000 R 250 000
61 to 90 days R 0 R 0 R 125 000 R 125 000 R 125 000 R 125 000
Total Debtors Age Analysis R 500 000 R 750 000 R 875 000 R 875 000 R 875 000 R 875 000
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Total Debtors Age Analysis R 500 000 R 750 000 R 875 000 R 875 000 R 875 000 R 875 000
Company YTurnover incl VAT/Sales Tax Feb 2014 Mar 2014 Apr 2014 May 2014 Jun 2014 Jul 2014
15 days Invoice R 0 R 100 000 R 200 000 R 300 000 R 400 000 R 500 000
30 days Statement R 500 000 R 400 000 R 300 000 R 200 000 R 100 000 R 0
Total Credit Turnover incl VAT/Sales Tax R 500 000 R 500 000 R 500 000 R 500 000 R 500 000 R 500 000
Debtors Age Analysis as at
Month end
Feb 2014
Month end
Mar 2014
Month end
Apr 2014
Month end
May 2014
Month end
Jun 2014
Month end
Jul 2014
1 to 30 days (Current) R 500 000 R 500 000 R 500 000 R 500 000 R 500 000 R 500 000
31 to 60 days R 0 R 250 000 R 250 000 R 250 000 R 250 000 R 250 000
61 to 90 days R 0 R 0 R 125 000 R 125 000 R 125 000 R 125 000
Total Debtors Age Analysis R 500 000 R 750 000 R 875 000 R 875 000 R 875 000 R 875 000
3. Performance Review Company X
A/R Performance Measurement Feb 2014 Mar 2014 Apr 2014 May 2014 Jun 2014 Jul 2014
Debtors Days - Average Sales Method (3 months) 30.00 45.00 52.50 52.50 52.50 52.50
Days Sales Outstanding (DSO) 28.00 45.00 53.25 53.50 53.25 53.50
Best Possible Days Sales Outstanding (BPDSO) 28.00 31.00 30.00 31.00 30.00 31.00
Delinquent Days Sales Outstanding (DSSO) 0.00 14.00 23.25 22.50 23.25 22.50
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Delinquent Days Sales Outstanding (DSSO) 0.00 14.00 23.25 22.50 23.25 22.50
Days Sales Outstanding Benchmark (DSOB) 28.00 31.00 36.89 41.05 42.40 44.33
Delinquency Index (DSO/DSOB) 100.00% 145.16% 144.35% 130.32% 125.59% 120.68%
Delinquency Improvement Target (DSO to DSOB) 0.00% 31.11% 30.73% 23.26% 20.38% 17.13%
Accounts Receivable Performance Values
Total Debtors Book Value R 500 000 R 750 000 R 875 000 R 875 000 R 875 000 R 875 000
Debtors Delinquency Index Target Value R 0 R 233 333 R 268 845 R 203 555 R 178 286 R 149 922
DSOB Value R 500 000 R 516 667 R 606 155 R 671 445 R 696 714 R 725 078
4. Performance Review Company Y
A/R Performance Measurement Feb 2014 Mar 2014 Apr 2014 May 2014 Jun 2014 Jul 2014
Debtors Days - Average Sales Method (3 months) 30.00 45.00 52.50 52.50 52.50 52.50
Days Sales Outstanding (DSO) 28.00 45.00 53.25 53.50 53.25 53.50
Best Possible Days Sales Outstanding (BPDSO) 28.00 31.00 30.00 31.00 30.00 31.00
Delinquent Days Sales Outstanding (DSSO) 0.00 14.00 23.25 22.50 23.25 22.50
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Delinquent Days Sales Outstanding (DSSO) 0.00 14.00 23.25 22.50 23.25 22.50
Days Sales Outstanding Benchmark (DSOB) 28.00 45.76 45.50 44.95 42.40 39.77
Delinquency Index (DSO/DSOB) 100.00% 98.34% 117.03% 119.02% 125.59% 134.51%
Delinquency Improvement Target (DSO to DSOB) 0.00% -1.69% 14.55% 15.98% 20.38% 25.66%
Accounts Receivable Performance Values
Total Debtors Book Value R 500 000 R 750 000 R 875 000 R 875 000 R 875 000 R 875 000
Debtors Delinquency Index Target Value R 0 R -12 698 R 127 347 R 139 836 R 178 286 R 224 497
DSOB Value R 500 000 R 762 698 R 747 653 R 735 164 R 696 714 R 650 503
5. Comparison of Results Company X vs Y
Days Sales Outstanding (DSO) Feb 2014 Mar 2014 Apr 2014 May 2014 Jun 2014 Jul 2014
Company X 28.00 45.00 53.25 53.50 53.25 53.50
Company Y 28.00 45.00 53.25 53.50 53.25 53.50
Industry Standard 60.00 60.00 60.00 60.00 60.00 60.00
Days Sales Outstanding
Benchmark (DSOB) Feb 2014 Mar 2014 Apr 2014 May 2014 Jun 2014 Jul 2014
Company X 28.00 31.00 36.89 41.05 42.40 44.33
Company Y 28.00 45.76 45.50 44.95 42.40 39.77
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Company Y 28.00 45.76 45.50 44.95 42.40 39.77
Delinquency Index (DSO/DSOB) Feb 2014 Mar 2014 Apr 2014 May 2014 Jun 2014 Jul 2014
Company X 100.00% 145.16% 144.35% 130.32% 125.59% 120.68%
Company Y 100.00% 98.34% 117.03% 119.02% 125.59% 134.51%
Index base 100.00% 100.00% 100.00% 100.00% 100.00% 100.00%
As can be seen above, the DSO for both companies are the same. The DSOB trend for
Company X is upward and the reverse for Company Y. If the monthly revenue fluctuate
then these trends will be directly affected.
For comparison purposes only the DSO, DSOB and Delinquency Index trends are shown.
6. Comparison Graphs Company X vs Y
0.00 10.00 20.00 30.00 40.00 50.00 60.00 70.00
Feb 2014 Mar
2014
Apr 2014 May
2014
Jun 2014 Jul 2014
Company X Company Y Industry Standard
Days Sales Outstanding (DSO) D
eb
tors
28.00
33.00
38.00
43.00
48.00
Feb 2014 Mar 2014 Apr 2014 May
2014
Jun 2014 Jul 2014
Company X Company Y
Days Sales Outstanding Benchmark (DSOB)
De
bto
rs
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90.00%
100.00%
110.00%
120.00%
130.00%
140.00%
150.00%
Feb
2014
Mar
2014
Apr
2014
May
2014
Jun 2014 Jul 2014
Company X Company Y
Delinquency Index (DSO/DSOB)
Be
nch
ma
rk
The DSO graph show that based on Total
Turnover and Debtors Book value,
Company X and Y is the same.
The DSOB show the reversal of trends
between the two companies with the
Delinquency Index indicating the change in
risk profiles of the two companies.
7. Contacts
Contact me for Initial Reviews and Monthly
Reports for your company or clients:
Wessel Roux
Copyright 2015 Mantramax Pty Ltd -
All rights reserved
Wessel Roux
Cape Town, South Africa
Cell +27 (0) 82 852 9924
Fax +27 (0) 86 689 1093
Email [email protected]
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