The Hindu Business Line : Service providers improve collection of payments

Chennai/Mumbai Oct. 29 Collection of receivables from clients by top Indian IT services companies has improved for the quarter ended September 2008 compared to the year-ago quarter.

The table shows declining figures of debtor days (or day sales outstanding / DSO) for the top four companies. (DSO is the ratio between accounts receivables and sales. It is an indication of the time taken for service providers to get clients to pay up.)

Analysts seem happy, and even surprised at the trend. “Being able to reduce DSOs is a pleasant surprise given the current situation.

This shows that all the talk about efficiency improvement is translating into gains (for these companies),” said Mr Rishi Maheshwari, Independent IT analyst.

Likewise, Mr Harit Shah, IT analyst at Angel Broking said that lower DSO figures come at a time when decision-making at the client-end seemed rather slow. “By now, most IT companies are fully aware which of their clients are in trouble and hence it seems that the extra effort put into improving collections has paid off.”

In the June 2008 quarter, debtor days had risen compared to the June 2007 quarter and companies had specified DSO figure targets and a few measures by which they wanted to rein in the figure.

India’s top IT services company Tata Consultancy Services’ Chief Financial Officer, Mr S. Mahalingam, had said after the June 2008 quarter results that it saw the billing function as a six-sigma exercise. “Managers who interact with customers are part of an incentive scheme that has higher weightage for keeping DSOs low.”

TCS still has some way to go before it touches a DSO level of 70 days that it saw as optimum after the June quarter results. Asked to comment on the September figures, Mr Mahalingam told Business Line, “We have been constantly focusing on bringing down our DSOs. We are satisfied with the current level,"

Infosys has seen a sharp decline in DSO figures between the June and September quarters this year.

It had expressed satisfaction even at the 69 day levels in June. It had said that its optimum level is in the 65-75 day range. In the September quarter, the company has exceeded its own expectation.

Satyam is well on its way to reaching its target of the 75- to 85-day range for DSOs. After the June quarter results, it had said that in a couple of quarters from then, it should reach that range.

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