DSO calculation and reporting
Why calculate the DSO?
- This is a key indicator of receivables performance management. It represents the number of days of sales stuck in the accounts receivable.
- Improving DSO (acronym of Days Sales Outstanding) has a direct effect on cash flow of a business.
- The main drivers for improvement are :
- Negotiate shorter payment terms with customers.
- Get downpayments and payments in advance.
- The establishment of an effective process of collection.
- Discounting of Accounts receivable (factoring...etc.).
Set up DSO calculation scopes :
- On the total accounts receivable of your company.
- On a specific business or group of customers.
- On a single customer.
Sales data including taxes
Connexions with other tools
- Run the average cost of funding calculation tool to calculate the cost of the DSO and of overdue invoices for your business (needs to be logged).
How to Interpret the result:
- The DSO is the sum of contractual DSO and overdue DSO.
- The contractual DSO represents the share of the indicator which is due to the payment term granted to the clients.
- Overdue DSO is the part that is the result of late payments from customers.
- Your DSO trend on a monthly basis.
- Cost of the DSO with the global cost of accounts receivable and cost of overdue DSO.
- Overdue % report (overdue / total AR), key performance indicator in cash collection
- Refresh the page to update graphics
DSO graphs templates