Days Sales Outstanding (DSO) has an impact that can be felt well beyond the finance department, as it reflects the size of a company’s outstanding accounts receivable (AR) – one of the largest assets on a balance sheet. What we’ve learned from speaking to our customers is that credit and collections managers sometimes have a love/hate relationship with DSO. Why is that?
In business, an increase in something is generally seen as a positive thing, such as revenue or efficiency. But in terms of DSO, an increase is often negative because it potentially indicates less efficiency and a reduction in free cash flow. DSO is more nuanced than that, though. Finance professionals know that an increase in DSO doesn’t always reflect the true efficiency of the collections team.
So, while DSO is an incredibly valuable metric, it also catches a bad rap for this reason. Download this eBook to take a deeper dive into what DSO is, what DSO is not and how to calculate it.