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How Healthy Is Your Inventory?

By Kris Satkunas
November 21, 2008

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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