These two metrics cover the total percentage of a logistics company’s invoices that are past due and the total dollar amount of those past due invoices. It’s useful for showing the rate of financial growth or decline. And you must remember that even the most established company’s financial health never runs in a straight line.
The ongoing logistics recession and supply chain disruptions have meant that brands with decades of heritage and prestige have been hit with cash flow issues. Yellow Corporation, a business with over 100 years of history, is the standout example here, having filed for bankruptcy in August 2023.
So, you need to pay close attention to the DSO metric as an indication of your cash flow health. Bill James, Enterprise Strategy Director at Creditsafe, has some words of advice for logistics companies.
“Don’t just look at the overall [invoice] percentage because it’s dollar weighted. If you have one large bill that was late and is in dispute, that could really skew the percentages. I always tell people to take a deeper dive into the full details of the trade payment data. The higher the DSO number, the worse it is. On a surface level, if DSO is 20% or higher, then look at the payment history of your customers and see if the high DSO is due to a large, single transaction that’s a big dollar amount. That could indicate that it’s an outlier. Analysis is always key.”