Debtor days on the rise for bigger firms

By agencies   |   Wednesday, 25 May 2005, 07:00 Hrs
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CHENNAI: Bigger companies have seen an increase in the time taken to complete collections from clients for work done.

For smaller software companies, debtor day figures are down compared to a year ago. (Debtor days is a ratio between receivables and sales. Greater the collection from clients, lesser the debtor days value.)

Infosys Technologies and Wipro Technologies have both seen a rise in debtor days.

In its analyst call, Infosys said a client had delayed a payment due to an internal reorganization and that it had received a large check, equivalent to 12 days, in the first week of April.

"If you factor in the 12 days, the (debtor day) figure is 57, which is in a very normal range," it had said.

The figure is higher than the 49 it recorded for the year ended March 2004 and the 52 it saw for the March 2003 year.

Mphasis-BFL saw the biggest slump from 70 to 56. HCL Technologies and Cognizant Technology Solutions has shown a small increase between March 2004 and March 2005.

Debtor days relative to sales point to cash flow trends. Increasing sales and a simultaneous slump in debtor days has a positive impact on cash flow.

If sales decrease and debtor days also decrease, cash flow management has improved but there could be impact due to decreased sales.

When debtor days increase while sales decrease, there will certainly be pressure on cash flow.

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