Day Sales Outstanding (DSO) is an important metric for any business, providing valuable insights into the efficiency of a company’s accounts receivable process. It measures the average number of days it takes for a business to collect payment after a sale has been made. The formula to calculate DSO is:
DSO = (Accounts Receivable / Total Credit Sales) x Number of Days in the Period
Understanding your company’s DSO allows you to determine how long customers are taking to pay their bills and get insight into areas which can be improved for better cash flow management. Keeping track of DSO helps ensure that your business stays on top of its accounts receivable process, helping you improve customer relationships and maintain consistent cash flow.