ERP Logic

Tracking DSO & Cash Conversion Cycle in SAP Business ByDesign

One of the most important Key Performance Indicators (KPIs) used by businesses is the DSO. DSO or Days Sales Outstanding measures the cash collection efficiency of an organization and is, therefore, of immense interest to CFOs and CEOs. In this post, I will explain how to set up DSO as a KPI in SAP Business ByDesign. I will also extend this to set up all the other KPIs that collectively make up an organization’s Cash Conversion Cycle, which measures the time cash is tied up in inventory and receivables. (Please refer to this Investopedia article for background on the Cash Conversion Cycle)

The first step in setting up a DSO KPI is to create a report containing balances for GL accounts that make up Accounts Receivable and Sales. This report can be based on the Trial Balance report. Once this report is set up, create a calculated key figure for DSO as shown in the screenshot below:

 

Now that we have the DSO key figure in the report, we can easily create a KPI based on it. The video below by Stefan Kraus shows the process of creating a KPI in SAP ByDesign.

 

Follow the same process to set up the DPO (Days Payable Outstanding) and DIO (Days Inventory Outstanding) KPIs. The Cash Conversion Cycle (CCC) is just a calculation based on the key figures DSO, DIO and DPO (CCC = DSO + DIO – DPO). These KPIs can now be added to the My Launchpad view in the Home work center and in the SAP Business in Focus app as shown below:

 

Having the ability to quickly and easily track KPIs and drill into details is crucial to management as it aids in visibility and decision making. SAP Business ByDesign enables KPIs and dashboards to be set up easily without any coding. If you have any questions, please contact me at harish@erplogic.com. I will also be available at Sapphire next week at booth 1433B.

From : Solutions Director at ERP Logic
Author : Harish Toppae