This is the first of a series of posts looking at a financial measure to which most small to medium businesses do not pay enough attention. Not only can careful attention to the Days Sales Outstanding measure have a direct impact on a company’s bottom line, but working to improve this measure will have other less obvious benefits to your business.

What is Days Sales Outstanding (DSO)?

Days Sales Outstanding measures the average number of days it takes a company to collect revenue after a sale has been made.

This is a metric related to cash. Through converting sales to cash quickly, cash can be put to other purposes and used again.
General Interpretation

A low DSO is good – you turn sales into cash quickly.

A high DSO is less good – it takes longer to convert your sales into cash.

The Calculation

DSO = Accounts Receivable / Amount of Sales per Day

I like to look at numbers in trailing twelve month periods. It makes every month the end of a year and it removes monthly abnormalities. Many otherwise hard to spot patterns become easier to see.

Step 1 – Calculate Accounts Receivable Amount

For my business I use the average month end accounts receivable amount from my monthly balance sheet over the last 12 months.

To make our numbers simple, lets assume that on average we are carrying $600K in accounts receivable.

Step 2 – What are my total sales over the period I’m examining?

In our example, let’s say sales over this period (12 months) was $3.6 million. So our business is doing $300K of business per month and approximately $10K per day. To be exact 3,600,000 / 365 = 9,863. I’m going to round up to $10K to keep the numbers simple.

Step 3 – Divide Accounts Receivable by the Amount of Sales Per Day

$600,000 / $10,000 = 60

So in our example we have 60 days worth of sales tied up in receivables, a DSO of 60.

This measure works for other time periods as well. Let’s say that we were looking at a fiscal quarter. Over three months our sales were $900K (3 x $300K). Guess what? Our daily sales are still $10K ($900K / 90 days).

In actuality sales come irregularly over months, so the number vary.

It is important to make sure the Accounts Receivable Period matches the Sales per Day period. For example, let’s say I want to calculate this for a month. I’d take the average Accounts Receivable balance on each day of the month (or more likely just take the beginning amount and the ending amount and average them). I would then divide by the sales per day.

Stay tuned for the next article in this series where we talk about the implications of DSO.

Photo Credit: Lynchburg College Archives
– Photo of an old invoice

Below you will find a second dose of positive customer service stories. You can find part one here.

• Reedy Carpets in Orlando stands behind their carpet.
  

  We contacted Reedy Carpet who immediately contacted Shaw Carpets. They arranged for an inspection and upon receiving the report they volunteered to replace the carpet entirely even though “pooling” is not covered under their warranty. . .This experience tells me that I was correct in my choice of a dealer and that Shaw Carpets still believes in and practices good customer service.



• Strong Elder Care Businesses Focus on Customer Service During Challenging Economic Times – This is a press release, but still has some good information.
  

  While businesses need to focus carefully on cutting expenses where they can, for a company to survive, customer service needs to be bolstered, not cut. aQuire Training Solutions has developed a series of new courses on basic – and advanced – customer service skills. These courses are designed for caregivers and other staff working in the senior care environment: home care agencies, assisted living communities, nursing facilities and more.



• A custom canvas company that proves they know their customers. Carrie Lewis, an artist, raves about Signature Canvas. The company provides excellent customer service and included a customized certificate for the artist.
  

  Talk about a Class Act! If you’re looking for a company that gives individual attention to every order, that custom builds supports using first rate materials or if you just like to try new things, give Signature Canvas a try. You will not be disappointed in the product or in the way you are treated.



• Customer Service in Switzerland.
  

  I had such a good experience and I want to share it with you . . . Monday, I went to H&M to buy some clothes for my little daughter. I began to look around and found stuff for me as well . . . Anyway, long story short, I bought a nice cardigan and put it in the washing machine. The tag was saying to clean it by machine on the wool cycle, as I did. It came out so small . . . I looked for the bill, and my dear husband throw it away . . . I decided to send an email to H&M and told them my story . . . The very next morning, I received an email back. The lady was going to take care of it and contact the quality department . . . She told me to bring it back where I bought it, she will contact the Manager and they will give me my money back!



• Where Has This UPS Envelope Spent The Last 14 Years? The UPS lost a package, found it 14 years later, the contents are missing, and they want to honor their claim.
  

  This week, Paul received a package back from UPS that had somehow never reached its destination. That”s not so unusual. What was unusual was how long it had wandered off for. He had mailed the next day air envelope at least fourteen years ago. . . While it”s curious that the package went missing for so long, lost its contents, and then still found its way back to Paul, we are rather impressed that UPS is willing to pay his claim if he does ever manage to figure out what was in that envelope… a decade and a half ago.



• Excellent customer service at Graham & Brown.
  

  My wife took a few hours to browse and add items to her shopping cart to review with me later. The next day we had time to look over her selections. Unfortunately all of the items in her cart had disappeared. She even created an account to make sure that the items in her cart would be saved.

  She called Graham & Brown customer service to tell them about the problem. They quickly apologized and explained that the site had just launched. Their web team was working out some bugs, and they were glad to hear our feedback. Customer service also offered to send us the wallpaper samples that we chose free of charge. As we make our final wallpaper selection I’ll be happy to give Graham & Brown my business because of this great experience.

Photo Credit: Phil Dowsing

Now that is customer service!

So frequently, we talk about poor customer service. I wanted to find some examples of excellent customer service. Below are 10 examples of what people found to be excellent customer service. I hope one of them triggers an idea.

1. Customer Service Gone Terribly Right – Nintendo makes exchanging a Wii convenient.
2. “She has such a cheery disposition” – Whenever anyone steps up to the counter, Weaver waves a blue and white pompom and chirps: “Hi, everbody. Welcome to Arby”s”
3. Olson Tire Reaches 50-Year Milestone – Interesting story of how a business grew by serving its customers. From the comments: “I have been purchasing tires from Olson”s since 1985. Never, never have I had either bad tires or bad service. Their approach to customers is golden. Thanks for being there Olsons.”
4. A Customer”s Positive Experience with Remington – “Remington could have hung tough and made Rick pay the shipping. Instead, for $10 they bought themselves a loyal customer for life. That’s smart business.” After the main story there are a lot of positive (and negative) customer service stories (most gun related).
5. 10 Companies That Treat You Right – A rundown of the companies, ranked by the percentage of “excellent” scores they got in a survey that Zogby International conducted for MSN Money.
6. Asiana Airlines Reviews – This airline has so much positive feedback. I”m going to take a chance and just link to the general forum at Skytrax. I bet you the top few reviews are all positive.
7. Magnolia Restaurant in the Turks and Caicos – You need to read the whole string of comments. It”s a beautiful lost shoe – found shoe story.
8. Excellent Customer Service From Amazon.com – A post from 2006, but a good story.
9. Apple Repair Store Recovers From a Mistake They Made – By a Lot – This is a really good story. There is some adult-language in the post, so skip this one if that offends you.
10. Customer Service at Ritz-Carlton: It’s All About People – A story of Ritz-Carlton”s regular excellent service

And as an extra bonus:

• Airport Fastpark – This is a story written by me regarding one of my favorite companies. Can you believe it is an airport parking lot?

This was one of the harder posts to write. People do not write often enough about their positive experiences. Writing a post about Poor Customer Service would be difficult as well – but because there is so much written about it, it would be hard to pick what is included.

Let”s reverse that trend and talk about the excellent service we have received. I”d love to hear your stories in the comments.

This post was originally published on Neal Levene”s Simple Complexity blog on August 14, 2009. It has always been one of the top rated posts from that site, so I have republished it here. It was a bit off topic for that site, but right on topic for here.

Photo Credit: Matt Watts

One of my best childhood memories was going to visit my grandfather, who owned the Nay Aug Amusement Park in Scranton, Pennsylvania.

Nay Aug Amusement Park was a small amusement park within the Nay Aug Park grounds. It was run by two brothers, Karl and Ralph Strohl, who received the park from their father. Karl’s wife Ruth and Ralph’s wife Sara (for whom my oldest child is named) both used to work in the back ticket booth on busy days. The amusements included toy tanks in a circle (later switched to cars and motorcycles), caterpillar, bumper cars, helicopters, cars on a track, merry-go-round, boats in a small pond, and a small whip. One of the park’s highlights was the small wooden roller coaster, the Comet Coaster (also known as Comet, Jr.). There was a miniature Lackawanna train which went around the roller coaster. There were also several “adult rides”: the Trabant, the Scrambler, and the Tilt-A-Whirl.

There was an arcade that housed the bumper cars, pinball machines, and some vending. It was previously a dance hall during the 1930s and 1940s where big bands came to play. The park was closed in the 1990s, and its site is now green space. If you know where to look, you can still see some of the painted railing from the park in some of the brush.

I’ve run across a number of people over time who have been to the park. If anyone has any photos of the park, I would love to have copies. You can send the photos via the contact page.

Slideshow

Photo Gallery

Little Boats that went in circles. For some reason, more fights between kids and their parents happened here than any other ride.

My cousin Amy Wasserman on one of the Old Fashioned Cars that used to go around on a track at the back of the park. This picture ran in the Scranton Times on July 7, 1976.

The Caterpillar, Photo Credit: Lane by Lane on Flickr

You can see the roller coaster coming around behind the train.

Not exactly what the cars were like at Nay Aug, but close. Photo Credit: knoebels.com

Main photo: from family photos - back of park with helicopter ride. Inset photo: kiltedlibrarian on Flickr

The Merry-Go-Round at Nay Aug Amusement Park. There was always loud patriotic music playing. Photo: family photos.

Pictured from Left to Right are: Mark Wasserman (my cousin), Mindy Spak (my sister), Amy Wasserman (my cousin), Neal Levene (me), and Karl Strohl (my grandfather and co-owner of the park). The picture was taken around 1976.

View of the park from front across the street where the adult rides were located when I was a child.

Photo Credit: manganelli.org

Photo Credit: Kittie55 on Flickr

This ride went through at least three versions. Here is pictured toy tanks that used to go around in circles. Around the time of the Vietnam War, this ride became fire engines and colored cars, and in the early eighties, it was these motor cycles and buggies with these buzzers that you would hear all afternoon. Photo: from family photos.

Photo Credit: G Barret on Flickr

The train went around the roller coaster tracks. This was the only ride that I was never allowed to operate. My older cousin, Mark, for some reason was allowed to do so. I was very jealous.

The Whip, Photo Credit: Hoffman on Flickr