How Healthy Is Your Inventory?

All businesses that accumu­late material amounts of ac­counts receivable ("A/R") rely on metrics that measure the turnover of those receivable balances as a gauge of risk and li­quidity. One of the most common metrics used is what many indus­tries call Days Sales Outstanding ("DSO"), a measure of the rela­tionship between outstanding receivables and sales levels. Law firms are no different. They mea­sure Days of A/R.

While the concept of Days of A/R is straightforward, there are nuances to measuring inven­tory results that require insight and critical thinking. Ultimately, analytics are only as valuable as their application, and the application of misinterpreted results could prove costly to a law firm.

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