Report Details and Tips
Accounts Receivable KPIs
The best known and most frequently used collections KPIs are presented together to illustrate trends and anticipate problems.
- Days Sales Outstanding (DSO) is the average number of days from the invoice data that it took to collect payments. The Tally DSO is a variation of True DSO that adjusts for partial payments. Read more.
- Average Days Delinquent (ADD) is the average number of days from the due date that late payments were received. Read more.
- Days Beyond Terms (DBT) is the average number of days that overdue invoices are overdue. It’s essentially an average of the aging statement. Read more.
Ways to use it
DSO, ADD and DBT are each useful on their own, but real insights come from learning how to interpret how they move together. With a little practice, comparing changes in the three KPIs quickly points to problem areas deserving more investigation.
For example, DSO and ADD will often move up or down together. That’s because more late payments will usually cause both KPIs to increase, and fewer or smaller late payments will result in both KPIs decreasing. There may be good reasons for DSO and ADD to move in different directions, but that’s less common and probably worth taking a closer look.
Adding DBT to the analysis helps. An increase in DSO and ADD is normally considered a negative result, because payments are being collected later. However, if DBT decreases at the same time then that suggests some overdue invoices were finally paid, which is good!
Read the articles on DSO metrics and how to move beyond aging statements to learn more.
Accounts Receivable Aging Summary
The chart and table expand on the traditional AR aging statement by providing more visibility into invoices 90+ days overdue. These are especially important because they’re at the highest risk of not being paid and they’re ignored by banks and other lenders.
Days Beyond Terms (DBT) is key metric to tracking how late all customers are at any given moment. Simply put, DBT is the weighted-average of the number of days that overdue invoices are past terms. Read more.
Ways to use it
The AR aging summary can be used to prioritize collection efforts, maybe by focusing on the oldest invoices first. Tally Street also provides a more dynamic AR prioritization list every week that considers the amount on the invoices and the changing risk profile of each customer too.
Businesses write-off an average of 2% of credit sales as uncollectible, ie bad debt. The aging statement, and especially one with more details on amounts 90+ days overdue, can be used to more accurately estimate bad debt allowances. For example, you might take a 5% allowance for invoices over 90 days late, a 10% allowance for invoices over 180 days late, and write-off those over 270 or 360 days late.
Collection Effectiveness Index
The Collection Effectiveness Index (CEI) is a newer metric that expresses collection efforts by providing an index of receivables portfolio performance. The CEI was developed by Dr. Venkat Srinivasan (SR Research) and the Credit Research Foundation.
The CEI is a measure of the quality of the collection of receivables, not of time. The closer to 100%, the more effective the collection effort is. For example, a CEI of 80% essentially means that 80% of what should have been collected was collected. That will be true even if payment terms change over time, or different customers are offered different payment terms.
The CEI is calculated by adding beginning receivables and new credit sales and subtracting ending receivables. That is divided by the total of beginning receivables plus new credit sales minus ending current receivables. Any period of time can be used for the calculation.
Ways to use it
CEI is well suited as a company goal, for tracking collections performance over time, and benchmarking against other companies and industries. That’s because CEI is a measure of collection quality instead of the number of days to collect. Other metrics such as Days Sales Outstanding (DSO) are also useful, but are relative metrics best considered specific to a company.
For example, a company that changes payment terms from net-15 to net-30 might see DSO increase from 17 to 35. HOWEVER, the collections team is still performing about the same, it’s just that payment terms changed.
As another example, a company offering customers net-30 terms might have a DSO of 35, while another company offering customers net-60 might have a DSO of 70. Just comparing DSO metrics makes the second company look much worse, but the difference is really because of the different payment terms being offered.
In both examples, the companies could all have a CEI of 85% — in other words, the quality of their collections efforts are equal.
Collection Performance
Report of cash collected in each of the prior 10 weeks. The total amount overdue, total amount outstanding, the percentage overdue at the end of each week.
Ways to use it
The % Share Overdue can serve as a key performance indicator (KPI) for collections teams. Although the amounts collected and overdue will change, teams can set a goal to consistently keep the percentage overdue below some target threshold, eg, 25%.
Credit Memos And Discounts Summaries
The most recent six months of credit memos and discounts are summarized if there are any to report.
Credit memos and discounts are best recorded by using the standard functionality in the accounting system for issuing credits for returned products, writing off uncollectible A/R, and tracking discounts on products and services. General ledger entries may not be captured.
Customer Concentration
Table with a list of your top five customers and/or any single customer representing more than 10% of sales over the trailing 12 months (TTM).
Ways to use it
High customer concentration is one of the greatest risks to businesses. Experts say customer concentration is too high if any single customer accounts for over 10% of 12 months of sales, or if your largest five customers account for over 25%.
Customer And Net Revenue Retention Trends
Customer and net revenue retention are calculated for the current and prior periods and presented as two trend lines. The customer retention trend on its own shows how well customers are being retained. As fewer customers are being retained (ie, more are being lost), businesses must acquire new customers and/or sell more to existing customers to keep growing revenue.
The net revenue retention (NRR) trend shows how those existing customers are increasing or decreasing spending, including a decrease all the way to zero (ie, a churned customer). The NRR trend line can exceed 100% if enough customers are increasing purchases from period to period.
The retention reporting period is automatically selected based on overall customer purchasing patterns. For example, if most customers buy at least once a year but as frequently as every quarter, then 12 months will be used. A different retention period can be selected in your company settings.
Ways to use it
Customer and revenue retention goals will vary by business and industry. For example, great software-as-a-service companies (eg, Docusign, HubSpot, Salesforce) will have customer retention and NRR rates as high as 110% or 120% or more.
But every business can benefit from tracking retention metrics and understanding why they are changing. For example, falling customer retention and rising NRR can be a good thing! It might be capturing that the “wrong” customers are leaving while the “right” ones are staying and increasing their spending.
On the other hand, if both retention metrics are falling together then sales troubles may lie ahead. The combination of losing customers and retaining customers who decrease spending means that more and more new customers have to be won in order to keep sales high and growing. Once your new customer wins begin to slip, sales targets may be quickly missed.
Customer And Net Revenue Retention
Customer retention is simply how many customers were retained from one period to the next. A result of 100% means every customer was retained.
Net revenue retention (NRR) is a more comprehensive retention metric because it tells a more complete revenue story of existing customers, by analyzing how customers increased or decreased spending. It answers the question of what your top-line revenue would do if you did not gain one more customer, and it can exceed 100%. Read more about both customer and net revenue retention.
The customer and net revenue retention table summarizes how many customers are new or reengaged, retained, or lost (aka, churned), and the changes in their purchases.
- New customers are those who made their first purchase during the reporting period. Reengaged customers are those who “churned” because they didn’t purchase during the prior retention period, but purchased again during the most recent period. They are often customers that were “lost” but “won back.” Their total sales is the sum of all sales from new and reengaged customers during the retention period.
- Retained customers are those who purchased during both the prior and current retention periods. These are typically the most loyal and repeat customers.
Their change in total sales is how much they increased or decreased their total spending while still remaining active customers. - Churned customers are “lost” customers because they purchased before the current retention period but not during the retention period. Their “churned sales” is the total amount they spent in the prior period that was lost (or not spent) in the current period.
The retention reporting period is automatically selected based on overall customer purchasing patterns. For example, if most customers buy at least once a year but as frequently as every quarter, then 12 months will be used. A different retention period can be selected in your company settings.
Customer Segments And Results
Customers are automatically segmented (or grouped) based on their past purchase and payment performance. The table summarizes the performance of each customer segment.
Individual customer details are included in Tally Customer Sheet for subscribers with a paid subscription.
The article on smarter customer segmentation includes a description of each customer segment and the article on segmentation improvements reviews the methodology for assigning customers to segments.
Ways to use it
Business owners, marketers, and sales executives can put smart customer segments to great use! Start by understanding why a Champion or Good customer is in their category. For example, did they purchase a particular product or receive exceptional customer service? Or maybe they represent the type of customer that is the best fit for your business. (See product/market fit.)
As another example, the account management and support teams can focus on providing Promising customers the onboarding experience, support services, and/or cross-selling and upselling needed to transition them into Champions.
Customers tagged as Don’t Lose Them or Give Attention might have previously been good customers but they started purchasing less or even stopped buying and are now a churn risk. Kickoff an effort to re-engage them before it’s too late.
Monthly Sales
Compares monthly sales over the trailing 12 months (TTM) to the previous 12 months. The current month will be a lighter color when it’s a partial month.
Sales are reported in the period they are generated, for example, the date the invoice is issued. Sales include all items on the invoice or receipt, including deposits or prepayments.
Monthly Sales By Customer
Top 10 sales customers in the month, ranked by total sales recorded during the month. Total sales in the current year (year-to-date) and sales over the trailing 12 months (TTM) are also included.
Each customer is tagged with their customer segment. The sales performance and segment for every customer is included in the Tally Customer Sheet for subscribers with a paid subscription.
New & Repeat Sales
The table presents a summary of sales to new and repeat customers. New customers are those who purchased from you for the first time during the reporting period, and new sales are the total of those first-time purchases. Repeat customers are defined as those who purchased a second time (or more) and repeat sales is the total of those purchases.
The chart compares the average size of a new sale compared to a repeat sale over the last 13 quarters, if available.
Ways to use it
Acquiring new customers is necessary but it can also be expensive. Great businesses focus on retaining customers and growing repeat business to earn back those acquisition costs and boost profits. Research by Bain & Co was one of the first to study the value of loyal customers.
Prioritized Collections
Customers with overdue invoices are prioritized for collections based on their potential financial impact and the customers’ risk profiles.
The financial impact is measured by considering the combination of the amount overdue and how many days overdue. For example, a larger overdue amount can be prioritized more highly than a smaller amount that’s more days overdue.
Each customer’s risk profile is impacted by whether they’ve had a negative change in payment behavior. For example, a customer who usually pays 20 days late and is now 45 days late will have an increased priority because they are much later than usual.
Depending on your subscription, you may also have an A/R Prioritization sheet attached with extra details for each customer and each invoice.
Ways to use it
Collections teams can use the additional payment histories and prioritizations to help decide which customers to more aggressively pursue. Tracking customers that have become “unusually late” is also a great way to get ahead of potential problems.
CFOs and finance teams can use changes in customer payment performance to adjust credit limits and payment terms.
Sales and management teams may not want to sell more to customers who look like they might be in trouble.
Sales And Incoming Cash
Most accounting packages have sales reports and cash reports but they are typically separate reports. Seeing sales and cash side-by-side illustrates the lag between closing sales and collecting cash, and it helps highlight potential cash flow problems often obscured by growing sales.
Sales are reported in the period they were booked or made. Credit sales are those sales where payment was not received on the same day and credit is being extended to the customer. Cash sales are those where payment was received on the same day, including sales receipts. Cash collected is the total of cash sales and accounts receivables that were collected. Also, a deposit won’t be reported as cash collected until the deposit is applied as a payment.
Ways to use it
Check that cash collections are lagging credit sales by the expected time, eg, about one month if sales terms are net-30.
You can anticipate potential cash flow problems by comparing the total accounts receivable outstanding to cash collected. If A/R is increasing more quickly than sales, and collections are falling behind, then operational changes or additional funding might be needed.
Sales Progress For The Quarter
Each week of the current quarter will be added to the prior weeks in the same quarter to show total, cumulative sales. The sales total for the same quarter last year is also included as a horizontal, dashed line to create a target and provide additional perspective.
All sales are reported on the day they are generated, for example, the date the invoice is issued. Sales include all items on the invoice or receipt, including deposits or prepayments.
Ways to use it
Sales management and teams can quickly see how they’re progressing towards, or if they already surpassed, the sales performance last year. The chart is also a useful way to see whether sales growth is steady during the quarter or lumped into the last few weeks, for example.
Trending Of Total Sales Over Trailing 12 Months
Use this chart to quickly see if annual sales are trending up or down, and compare sales totals to prior periods. The sales amount for each month is the sum of all sales over the previous 12 months. For example, the sales total for October 2020 is the total of all sales from November 2019 through the end of October 2020.
Ways to use it
Spot flat or decreasing annual sales earlier than before! Because each month is the total sales of the prior 12 months, an upward line visually shows that annual sales are increasing. If the line starts to flatten or turn down, then sales have stopped growing. The comparison to the prior period (ie, 13 to 24 months ago) illustrates if sales are trending better or worse than a year ago.
Weekly Sales By Customer
List of the top 10 customers for sales in the previous week. Columns are also included for total sales over the year to date (YTD) sales and trailing 12 months (TTM).
Sales are reported in the period they are generated, eg, the date the invoice is issued. Sales include all items on the invoice or receipt, including deposits or prepayments.
Ways to use it
Sales teams can use this table to track weekly sales performance and congratulate colleagues for bringing in the top 10 customers last week!