There are a lot of different ways to measure the health of your account receivables and it can feel overwhelming! Each metric has some unique angle; some are monthly metrics (CEI), some are influenced by sales (DSO), some only look at the overdue invoices (DBT). What if you want a quick and easy way to gauge your overall AR health? Past due as a percentage of total AR is just what you need!
Calculating Past due as a percentage of total AR:
This receivables metric is as simple as it sounds. It is the total dollar amount past due, divided by the amount of total AR (x100). That’s it!
You can check this daily, weekly, monthly, whenever you’d like. A word of caution though, be consistent! If you’re looking for trends, measure this at the same time each week or month so you can get a reliable comparison and an accurate picture of your AR.
How to improve Past due as a percentage of total AR?
- Bump up your follow up efforts to past due customers, call and email them as soon as an invoice becomes delinquent. The sooner you follow up, the greater chance you have at collecting.
- Don’t let invoices become past due. Send friendly reminders the week before an invoice is overdue.
- Make paying easy! Offer multiple payment options with clear remittance information in all your customer communication.
- Make sure you have the right contact information for your customers. If you’re not sending invoices and reminders to the right place, it’s easier for your customers to ‘forget’ to pay you!