Financial Intelligence for IT Professionals: What You Really Need to Know About the Numbers

Part Seven

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ACCOUNTS-RECEIVABLE AGING

Accounts receivable is a major cash lever. So even though IT hasn’t traditionally paid much attention to accounts receivable, you may want to do so now that you’ve built up your financial intelligence. There are ways to manage accounts receivable more effectively than many companies do. We’ve talked about one measure, DSO, but it isn’t the only one to look at. Another is what’s called the aging of receivables. Often, reviewing aging is the key to understanding the true situation in your company’s receivables.

Here’s why. As we mentioned earlier, DSO is by definition an average. For example, if you have $1 million in receivables that are under ten days and $1 million that are more than ninety days, ...