A reader asks Billboard Insider what Days Sales Outstanding should be at an Out of Home advertising company. Days sales outstanding tells you how long it takes you to convert your receivables to cash. The formula is:
Days Sales Outstanding = (accounts receivable/last 365 days sales) x 365
What should days sales be for your company? A good rule of thumb is 30 days or less for local sales or 90 days or less for national sales.
- Most local sales contracts are net 30 and many business will pay faster than that with credit cards. Insider’s experience is that the longer a local business takes to pay the less likely you’ll get paid. If a local business hasn’t paid you after 60 days they’ve received the benefits of the out of home advertising and have either spent the funds on something else or concluded that the advertising isn’t working so they don’t want to pay you.
- National business comes through agencies which are notorious for taking 60-120 days to pay. You can complain all you want but it makes no difference. This is one of the reasons you should root for the automated sales platforms. They pay fast. Blip pays each month’s sales that month. Adquick accepts most payments digitally and pays out of home companies in 30-45 days.
This chart shows that local sales pay faster. Days sales is lowest at Insider’s own company, Circle City Outdoor, which does no national business and at Link Media (which Insider guesses is 20% national). Days Sales Outstanding Days sales is highest at OUTFRONT (45% national) and Clear Channel Outdoor (40% national but also large foreign receivables which Insider suspects are slow pay).
What are your goals for days sales outstanding? What’s been your experience with national sales versus local sales? Do you incent your employees to minimize days sales outstanding? Let Insider know using the form below and we’ll do a followup post.
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