1. Accounts Receivable Implementation Guide
  2. Calculations

Calculations

You can review statistical (periodic) calculations on the Periodic Statistics form from the Credit Collections Management menu (G03B15). This table describes how the system calculates this information for customers:

Page Element

Calculation Information

Bad Debt

If the Write-off Reason Code field is populated and the Special Handling Code field in UDC 03B/RC is blank, the system adds write-off amounts to the Bad Debt total. Otherwise, the amount is accumulated into the Minor Write-Off total.

Minor Write-off

If the value in the Special Handling Code field is equal to 1 in UDC O3B/RC, the system adds write-off amounts to this total.

Bad Debt Ratio

The system divides bad debt amount by the total sales for the period.

Calculation: Bad debt ÷ total sales for period.

Total Write-off

This field is the sum of bad debt and minor write-off amounts.

Calculation: Bad debt + minor write-offs.

Average Days Late (Non-Weighted)

The system uses these calculations:

  • Total number of days = Difference between the Invoice Due Date and the Receipt Date.

    The system calculates the number of days between the receipt date and the invoice due date, and adds this calculation to the Total Number of Days.

  • Average Number of Days = Total Number of Days / Number of Invoices Paid.

    The system calculates the average number of days by dividing the total number of days by the number of invoices paid.

The system includes only the receipts that close or the pay-off invoices in the number of invoices paid.

For example, suppose a receipt for 100,000 is one day late. Another receipt for 500 is 30 days late. Each receipt pays one invoice.

If you use a nonweighted average days late calculation, the average days late is 15.5 days:

Number of invoices / Days late = Nonweighted average days late

(2 / 31 = 15.5)

Weighted Average Days Late

The system weighs the average days late calculation by determining the current percentage of all receipt amounts. Larger receipt amounts have a greater effect on the average days late.

The system uses these calculations:

  • Number of Days = Difference between the Invoice Due Date and the Receipt Date.

  • Previous Receipt Amount = Amount of the last payment received.

  • Number of Days Current Receipt = Receipt Amount / (Receipt Amount + Previous Receipt Amount).

For example, assume that a receipt for 100,000 is one day late, and another receipt for 500 is 30 days late. Each receipt pays one invoice.

If you use a weighted average days late calculation, the average days late is 1.1 days. Previous Receipt Amount / (Receipt Amount + Previous Receipt amount)) + Number of Days Current Receipt (receipt amount / (receipt amount + previous receipt amount))

100,000 / (500 + 100,000)) + 30 (500 / (500 + 100,000)) = 1.1.

F03B16 and F03B16S Level Calculations for the Weighted Days Late:

Previous Average Days Late (previous receipt amount / (receipt amount + previous receipt amount total)) = Current Average Days Late (current receipt amount / (current receipt amount total + previous receipt amount)).

DSO

The system stores the DSO amount at the periodic level in the F03B16. You can use these methods to calculate DSO:

Using the countback method, if the current outstanding balance is less than the total sales, the DSO = (current balance ÷ total sales) / number of days in the period.

Otherwise:

  • Subtract the current period's total sales amount from the current balance and increment DSO with the number of days in the period.

  • Subtract from the remaining balance the total sales of the first preceding period.

    This continues until the outstanding balance of any preceding period exceeds the remaining balance.

  • If the remaining balance is less than the preceding period, then DSO = Accumulated DSO + ((current balance / total sales) / number of days in period).

The Current Balance Divided by Sales is calculated as follows: DSO = (current A/R balance à number of days inn periods) / Total invoiced over n number of periods

n = number of periods that are specified in the processing options

The Average Balance Divided by Sales is calculated as follows: DSO = ((total period end balance over n number of periods) / average number of days) / Total sales amount for n periods

Where:

  • Sales Amount is the taxable amount of the invoice. If you leave this field blank, the system uses the gross amount.

  • Period End is the open A/R amount at the end of the period.

  • Number of Days is the number of days for the period. This value is defined in the Credit and Collections Date Pattern table (F03B08).

  • n = number of periods specified in the processing options

For example:

For January, the Sales Amount is 7,570.00, the Period-End Balance is 10,825.00, and the Period Days are 31.

For February, the Sales Amount is 4566.00, the Period-End Balance is 10,596.00, and the Period Days are 28.

For March, the Sales Amount is 5,538.00, the Period-End Balance is 10,869.00, and the Period Days are 31.

DSO = (10,869 + 10,569 + 10,825) / 30 / (5,538 + 4,566 + 7,570) = 54.81 for March.

Note: The processing option settings for the sample calculation include 1. DSO Calculation Method = 1 (Avg. Balance) 2. Number of Periods = 3 3. Number of Days for Summary = Inception to Date