This session focuses on five key Accounts Receivable (AR) metrics that every CFO should monitor. These metrics are not just about tracking overdue invoices; they are powerful lead indicators of cash risk, customer behaviour, and operational efficiency.
Used correctly, they provide early warning signals, help tighten business processes, and strengthen overall liquidity.
DSO measures the average time it takes to collect payment from customers.
A rising DSO is a warning sign that customers are holding onto your cash for too long. While payment terms are often set in the sales process, outcomes can be influenced by ensuring terms are not stretched, invoices are issued promptly, and follow-ups are consistent.
It’s not just about how many invoices are overdue — it’s about how healthy the overall process is.
– Nana Le
Benchmarks:
Improving DSO requires strong onboarding of good-risk customers, efficient invoicing, and a disciplined collections process. Weak follow-up is a common problem, so embedding it into daily work and automating reminders can make a significant difference. Incremental “1% improvements” across each stage of the process add up to meaningful results.
The AR Turnover Ratio shows how quickly sales are converted into cash. It is a powerful benchmarking tool to track month by month.
A falling ratio signals collection inefficiencies, while a higher ratio indicates faster conversion of sales into cash.
Industry examples: Construction and manufacturing often have lower ratios, while food & beverage distributors may reach ~12×.
Case study: A manufacturing business slipped from 8× to 5× (collections stretched from 45 to 73 days). By tightening processes, turnover improved to 7.5× in six months, unlocking $1M in working capital.
This metric tracks the portion of receivables unlikely to be collected. Although it is often overlooked, it is crucial for identifying financial risk.
A rising bad debt ratio indicates it’s time to revisit credit policies and risk assessments.
Best practice for escalation:
Strong relationships with debt collectors and clear escalation procedures protect liquidity. Acting earlier avoids financial losses and reduces reputational risk.
CEI measures the efficiency of collections by comparing actual collections against the potential collectible amount over a specific period. It provides a more precise picture than turnover ratio alone, making it a useful metric for understanding the effectiveness of AR strategies. While not always explored in detail, CEI is valuable for finance teams looking to benchmark and track their collection performance more accurately.
The Cash Conversion Cycle (CCC) puts AR into the broader context of liquidity by including inventory and accounts payable. Even if AR improves, businesses may still face cash challenges if inventory or AP processes are inefficient.
Finance teams have a unique seat at the table because they can see across AR, AP, and inventory, and use those insights to strengthen liquidity.
– Nick Cooper
Benchmarks:
In some industries, particularly SaaS and fintech, businesses may achieve a negative CCC by invoicing in advance, effectively collecting cash before delivering the service. This creates a strong cash advantage, with customers essentially acting as early investors. The CCC reinforces that finance leaders must look beyond AR to inventory and payables, connecting insights across functions to manage liquidity effectively.
AR metrics should be seen as early indicators rather than after-the-fact reporting. DSO and AR turnover ratio highlight how well cash is being collected, bad debt ratio shows when credit policies need tightening, CEI provides precision in measuring collection efficiency, and CCC reminds us that AR is part of a broader liquidity picture. Incremental improvements across each process, supported by automation, can deliver significant results. Finance leaders who connect these insights across AR, AP, and inventory are in the best position to strengthen cash flow, reduce reliance on debt, and support sustainable growth.
Nana: Good morning everyone. Welcome and thanks for joining us today. I’m Nana, Head of Finance and Business Insights at ezyCollect. This is the second webinar in our ezyCollect Academy series, Cash, Risk & Returns: The AR Metrics CFOs Can’t Ignore. We have a very special guest with us today, our CFO, Nick Cooper. Hi Nick.
Nana: Could you please give everyone a quick intro about yourself?
Nick: Certainly—don’t often get mentioned as special, but thank you for that. Pleasure to be here. Hi everybody, as Nana mentioned, CFO here at ezyCollect, chief numbers nerd, and I’m really happy to be here with you today.
Nana: You forgot one extra title that you just got.
Nick: What’s that?
Nana: My celebrant at my wedding just two months ago. Nick officiated my wedding ceremony and it was a special moment.
Nick: It was amazing. I’m available for hire—everybody—may not be legal, but I certainly can help out with that for sure. Glad to have you, Nick.
Nana: We’ll keep today short and sharp, just 30 minutes. Before we kick off, a quick heads-up: this webinar is being recorded and you’ll receive a recording afterwards. If you have questions along the way, feel free to drop them in the chat. Right. So, Nick, you have worked with finance teams all over the world. When it comes to finance and AR overall, what do you think most CFOs tend to overlook?
Nick: I guess with accounts receivable (AR), it’s often looked at simply as the collections process—how do I get my money in? But if you really look at the metrics you can glean from the data, there are big insights. If you can master those AR metrics and use them as early warning signals, you’ll spot cash risk within the business—that’s the obvious one—but you’ll also see interesting insights into customer behaviour, and even the finance function’s operational efficiency and discipline. They can be used as benchmarks as well. It’s not just the process of looking at overdue accounts. If you’re doing that, it’s probably already too late. You’ve got to use them as lead indicators to run your business well—from a cash and liquidity point of view and also the effectiveness of your internal processes.
Nana: That’s such a good point. So instead of “how many invoices are overdue,” it’s really “how healthy is our process,” right?
Nick: Yeah, 100%.
Nana: And that’s exactly how and where AR metrics contribute to the CFO dashboard and help with day-to-day business operations. Now, before we go deeper, I’d love to hear from our audience today. Let’s run a quick poll. I’m curious—among these five metrics, which one do you check most often in your role? Days Sales Outstanding (DSO), AR Turnover Ratio, Collection Effectiveness Index (CEI), Bad Debt Ratio, or Cash Conversion Cycle (CCC). Let’s see—we’ve got some votes starting to roll in. It’s interesting. And we’re going to cover each of these five today. The first one on our list is probably the one everyone knows about, right? It’s really common and we’re seeing that in the results coming through. Interesting result—yeah, 100%. What about DSO? There you go.
Nick: It’s interesting. DSO—outside the finance or AR world—people might not know it. It’s another great acronym we use, but what does it actually mean? Days sales outstanding—it’s really interesting. Cool. All right, let’s have a look.
Nana: Let’s unpack the first metric, DSO, that we briefly mentioned. It’s probably the most quoted metric out there and it tells you how long, on average, it takes to collect from your customers.
Nick: You don’t want it creeping up. You don’t want it starting to increase. It’s that easy warning light on your dashboard that someone else has got your money in their bank account. That’s your money—it’s your cash—you’ve got to get it back.
Nana: Absolutely. But don’t you think it’s a bit tricky to influence DSO? Payment terms are usually set during the sales process. By the time it gets into finance, it’s probably too late to make changes. What’s your view on that?
Nick: Good question. Our sales team are no different—part of the sales process is negotiating what terms are offered for different products, and we’re no strangers to that. What you can do is make sure that if you do extend terms, you don’t allow them to be stretched. If you’re already extending 30 to 40 days, that’s your money—they’ve had that for free. You’ve got to get it back when it’s due. So it’s about setting up processes that enable you to collect on time and having a really strong function for that process.
Nana: To help assess how your DSO is performing, here are some indicators. Low DSO (less than 15 days) indicates strong collection practices and efficient credit management. A moderate DSO (30 to 45 days) is industry standard for B2B businesses—while not necessarily a concern, there’s room for improvement. High DSO (60+ days) is a potential red flag indicating delays in collection or cash flow risk. What should businesses do if they fall into this high DSO bracket, you reckon, Nick?
Nick: You really have to go back to the start of your process—look at it end-to-end. Start with onboarding good-risk customers. If you onboard well, they shouldn’t fall into high DSO. Have a robust credit application process to ensure you’re onboarding good customers. Review your invoicing process and your ability—how long does it take from sale closure to issuing the invoice to collection on those terms? You’ve got to look end-to-end and understand where you’re leaving a day or two. At each point you might be losing two to three days, and that adds up across the spectrum. If you have a weak follow-up procedure—many people don’t like following up; it can be hard and awkward—make it an easy, embedded process in people’s daily jobs to follow up, schedule, track, and monitor results. It won’t turn overnight, but incremental 1% improvements at each step will bring the metric down.
Nana: Absolutely. Wouldn’t it be great to automate everything end-to-end?
Nick: Absolutely. That’s what we do. Modern systems enable you to do your job—once these processes are automated, that’s where you want to get to.
Nana: Before we move on to the next metric, another quick poll: if you had to convince your CFO with one metric that your AR team is collecting efficiently, which would you choose—DSO, AR Turnover Ratio, or Cash Conversion Cycle? We’ll keep it quick. Interesting! For me personally, DSO is one we use and talk about a lot, but I love the next one—the AR Turnover Ratio—because in simple terms it breaks down how quickly we’re turning sales into cash.
Nick: Nothing gets me more excited than collecting cash faster. I personally like this one, and Nana knows I bang on about it all the time. It’s important to have line of sight on that metric.
Nana: So how is that used in your team, Nick, since it’s such a great metric for measuring AR performance?
Nick: We use it for benchmarking. We track it month on month. As we adapt our collections processes, we track the change. If we make an improvement and the ratio goes down, we’ve done something adverse—we need to revert and rethink. It gives a clear understanding of how effectively it’s working. We benchmark it all the time—it’s great.
Nana: Speaking of benchmarking, some industry markers for reference: the construction industry averages around six times AR turnover; manufacturing is lower than overall B2B; and food & beverage distributors often do much better with ~12× turnover. What do you think about this, Nick?
Nick: Interesting. Anecdote: a friend who’s a CFO at a manufacturing business—sales were crushing it, but cash reserves were drying up. She dived in and saw AR turnover had dropped from ~8× to 5×. In days-to-collect terms, it now took ~73 days rather than 45. She told the board, “Sales are awesome, but we’ve got a collections problem.” They undertook a process overhaul—about six months—and got back to ~7.5×. That unlocked roughly a million dollars of working capital to fund expansion—without dipping into debt. There’s no magic wand; you can’t change a metric overnight. But with the right steps over 3–6 months, you can move the numbers the right way.
Nana: Hand on heart—if you had the chance to score a big deal with horrible payment terms, what would you do?
Nick: I wouldn’t take the horrible terms. We need to get the money in. We’re a mid-size business; we see the challenges. A big shiny deal with big money is great, but if you fail to collect, you can’t pay what’s due. I’d rather a steady stream of faster-collecting smaller projects than a big one that pays a year later.
Nana: Let’s talk about the one metric nobody wants to talk about: Bad Debt Ratio.
Nick: It’s that scary rock you don’t want to look under, but it’s a reality. You’ll have clients doing it tough, and we’re seeing more fraudulent activity out there. You have to keep an eye on it, even though it’s hard to look at.
Nana: It’s also a conversation starter for credit policies. If this ratio is climbing, it’s time to revisit how you assess risk. Industry insights: manufacturing, construction and wholesale tend to have higher bad-debt risk, so they need to be more cautious while trading and negotiating.
Nick: Alongside the other points, have your next steps in place. We don’t have a lot of bad debt—we use our own product and collect well—but it’s important to have escalation steps ready. Build good relationships with your debt collection partners, and don’t delay moving to that step. We see results when something is in the 60–90 day period past due. If you’re on 30-day terms, you might extend to 45, chase from 45 to 60, and then if it’s not coming back—60–90 is the sweet spot. We work with partners like Armor and AGC; we help package the relevant documentation so they can chase it down. Once you get over 120–150 days, it gets much harder to collect what’s owed. Have procedures in place—when do we send to bad debt, and what do we do? With systems like ours, you can package it up, put a bow on it, send it off, and let partners handle it. We know it happens—don’t be afraid to send it. It’s often an easier conversation if it’s early, rather than at 150+ days overdue.
Nana: Before we move on, a quick touch on the Collection Effectiveness Index (CEI). It’s similar to AR turnover in that it measures how efficiently receivables are collected, but it compares actual collections against potential collections over a specific period. It’s more precise for gauging collection performance. We won’t go into detail now due to time, but it’s a great metric to explore further in our Academy resources. Are you sharing that link at the end, Nana?
Nana: Absolutely.
Nick: Cool—great. I’d encourage everyone to dive in. It’s a free resource the team has been curating on the exhilarating topic we all know and love—AR. We’ve been publishing a lot there; it’s a really good resource.
Nana: Thanks, Nick. Let’s take another poll—the last one today. If your AR improved but your cash still didn’t increase, where would you look first? You can select multiple options: Inventory, Accounts Payable, Discounts/Write-offs, or Others. That’s really interesting—very interesting result. Wow, 20 per cent selected all options—that’s great.
Nick: Absolutely true—it can be everywhere. In a previous life we had an inventory business, and that was always the spot I had to look. It was a fashion-tech business, and inventory was where we were losing in that metric.
Nana: Yes—Cash Conversion Cycle (CCC) reminds us that AR is just one part of the loop. Sometimes you win in AR but lose in AP or inventory.
Nick: Yeah.
Nana: How long does it take at ezyCollect, in general, to turn sales into cash and go the whole loop, Nick—off the top of your head?
Nick: I think we’re about 30 days from our collections. It can differ by product; from a payments space it can be shorter—but generally 30 days. We’re also at the whims of industry norms.
Nana: I’ve got some industry insights. 0–30 days can be considered healthy for the cash conversion cycle for mostly retail, e-commerce or subscriptions-based businesses. 30–90 days for wholesale and distribution. Unfortunately—manufacturing and construction generally take ~60–120 days to convert sales into cash and complete the CCC. For audience members from those industries—don’t feel it’s only your problem; it’s quite common.
Nick: With some of our products, we invoice in advance—annual contracts or monthly in advance—so we can even flip into a negative CCC, which is great for cash. A friend in a similar fintech used to say customers were their best early investors—paying upfront. That’s a luxury of software—you collect before you’ve effectively “earned” the goods. In a traditional goods-and-services business, you have to consider all parts of the CCC because AR is just one piece. As your diagram showed, you’ve got to look at Inventory and AP. Finance teams sit across and have visibility into each function. We manage cash balances and AP directly, but inventory may sit with operations/warehouse, and sales with the sales team. We report to the board and management across all of it, so we have a unique seat at the table to take insights across functions and pull the right levers to improve liquidity.
Nana: Thank you so much for your great insight. That wraps up our webinar today. If you have any questions, please drop them in the chat—we’ll do our best to respond after the session via email. Thanks again for joining us. A big thank you to you, Nick.
Nick: Always a pleasure, Ms Le. Always a pleasure.
Nana: If you’re keen to explore these metrics further, please check our Academy website. I’m Nana.
Nick: And I’m Nick Cooper.
Both: Thanks, and we’ll see you next time. Cool—thanks, everyone. Thank you.
