Accounts Receivable & Collections: DSO, CEI, Credit Limits & Bad Debt

What you'll build

What you will be able to do

Each lab ends with a concrete result that you build yourself and the checker confirms, cell by cell.

• Turn the Q2 invoice ledger of Larkspur Supply Co. into open items, the open balance per customer, each customer's share of the receivables and the number of open invoices.
• Measure how many days of sales Larkspur Supply Co. has tied up in receivables, first with the simple quarterly DSO, then with the count-back method that follows the actual monthly sales, and compare it with the payment terms.
• Calculate Larkspur Supply Co.'s monthly collections and the collection effectiveness index for six months, then the average and the weakest month.
• Age Larkspur Supply Co.'s open invoices at 30 June 2026 with a lookup table, apply a loss rate to each bucket and work out the bad debt expense needed to bring the allowance to the required balance.
• Measure how much of each customer's credit limit Larkspur Supply Co. has used, flag customers over the limit or on watch, and decide whether a new order can be released.
• Turn Larkspur Supply Co.'s paid-invoice history into a payment profile per customer: average days late, the amount-weighted version and the share of invoices paid on time.
• Map every open invoice of Larkspur Supply Co. to the dunning step its days overdue call for, compare it with the last step sent, count today's actions and size the amount at the serious end of the ladder.
• Roll Larkspur Supply Co.'s allowance for doubtful accounts forward through July, book a write-off, a recovery and the month-end top-up in the journal, and chart the roll-forward as a waterfall.