What is "Net" DSO?
Medpace CFO on last week's earnings call:
"our net DSO decreased...to negative 40.8 days".
How could DSO be NEGATIVE? What is "net" DSO?
Typically DSO is calculated as (A/R ÷ Revenue * Days).
For Net DSO, Medpace adds Unbilled Services to, and subtracts Advanced Billings and Allowance from, A/R.
So although Medpace has a typical DSO of +40-50 days, its Net DSO is (-40) because it holds extremely high Advanced Billings relative to A/R and Unbilled (smart).
By comparison, IQVIA's Net DSO ranges from +20 to +50, and PRA's from +5 to +23. No wonder they advertise it...
Bottom line- this unique metric combines collections, billings, and payment schedule efficiency into a powerful working capital analysis. I love it- give it a try! Message me with any interesting results you find...