Revolutionizing Order To Cash With Accounts Receivable Days Outstanding (Ardo)
ACCOUNTS RECEIVABLE DAYS OUTSTANDING FORMULA
Accounts receivable days outstanding (ARDO) can have dramatic impact on the financial health of any company. It is the ratio of average accounts receivable to revenue and can be strong indicator of corporate profitability and liquidity. For businesses currently relying on manual order-to-cash processes, ARDO can be difficult to track and manage. Fortunately, modern order-to-cash solutions offer sophisticated ARDO monitoring capabilities. In this article, we?ll explore what ARDO is and how it can be used to improve order-to-cash processes with the help of cloud-based solution.
What is Accounts Receivable Days Outstanding (ARDO)?
Accounts receivable days outstanding is the average number of days, or the period of time, company takes to receive funds for the goods and services it provides. This is key metric for business because it represents the amount of time it takes for the company to collect its money from its customers.
ARDO is calculated by dividing accounts receivable by total sales and then multiplying by the total number of days in the period being measured. ARDO is useful metric for predicting liquidity as it provides an estimate of how long it will take company to turn its receivables into cash.
Why is ARDO Important?
From C-Suite perspective, ARDO is essential for ensuring the financial health of an organization. Accurately tracking ARDO allows executives to identify pricing irregularities, credit-approval inconsistencies, and other performance issues that may arise. Additionally, it can inform executives of the cash flow available to run the business, enabling increased strategic decision-making.
Utilizing an Order-to-Cash Solution to Improve ARDO
In the pre-cloud era, tracking ARDO required manually updated spreadsheets and cumbersome data input. Manual ARDO management is tedious and time consuming, often leading to inaccuracies and misunderstandings. The cloud revolution, however, has brought with it isophisticated order-to-cash solutions that automate data entry, allowing businesses of all sizes to accurately track ARDO.
A typical cloud-based solution will provide detailed data on customer invoices and payments in real-time, making it easier to track and measure accounts receivable. This data can be further utilized to perform detailed analytics, such as breakdowns of customer accounts, payment trends, and sales forecasts. Such detailed analytics additionally enable C-Suite executives to make more accurate decisions for the future of their business.
Furthermore, many cloud-based solutions embed strong collections management tools, enabling businesses to enforce stricter accounts receivable accounting policies. Companies can also save time by automatically assessing how long customer typically takes to pay and setting payment reminders when accounts are overdue.
Cloud-based solutions also offer greater security, with their data being transmitted through encrypted connections to make sure customer information remains safeguarded.
Conclusion
Utilizing ARDO is an essential part of order-to-cash operations. Cloud-based solutions bring with them greater accuracy, enhanced functionality, and improved security to ARDO management. Executives can use these solutions to monitor and manage their accounts receivable, guarantee their financial health, and make more effective decisions for the future of their business.
