Receivable Management Performance Measurement Tool and Factors Affecting Account Receivable Performance

Days Sales Outstanding (DSO) is a calculation used by a company to estimate their average collection period. DSO is a tool to measure receivable management performance. Although DSO is commonly used to analyze the performance of account receivable, it has a weakness toward the fluctuation of the sales. DSO figure can be misleading since in its formula is included the sales value. Another tool to measure the effectiveness and the effort of collection done by collection department is Collection Effectiveness Index (CEI). A result of near 100 % indicates that the collection department has been very effective in collecting the receivable from customers. The purpose of this study is to analyze the significant relationship of Sales and overdue Bills (also known as Average Days Delinquent) toward DSO using Pearson product moments, and to figure out how is the impact of sales and overdue on DSO by using Multiple Linear Regression. There are three main factors which affecting the overdue bills (ADD), that is lead times of returned delivery note, the lead times of bills submission and the customer payment behavior. These three factor will be analyzed using Panel data Regression with Pooled Least Square Model. The study reveals that DSO has a significant relationship with fluctuation of the sales and it cause bias. From the result, it also prove that the overdue bills has larger impact on DSO compare with sales. The Customer payment behavior is the main cause of increasing the overdue, and the second is the lead times of returned delivery note.