What is DSO? Days Sales Outstanding Definition & DSO calculation

What is DSO ? 

 

Days Sales Outstanding (DSO) is a simple measure of how long it takes for you to collect an invoice. The goal is to have the lowest DSO possible, this means that the company quickly recovers payment on accounts receivable. A high DSO means in takes the company longer to collect accounts receivable, this is an issue for many companies.

DSO is calculated as:

DSO = (AR Balance / Credit Sales for a time period) X Number of days in that period

For example, a company with $10 million in annual credit sales and an AR balance of $1.5 million would have a DSO of 54.75, as follows:

54.75 = ($1,500,000 / $10,000,000) * 365

The annual cost to this company of carrying these receivables is $75,000, assuming financing at a 5% annual percentage rate.  Reducing DSO by just one day saves $1,370 in interest and frees up $27,397 in working capital.

One way to solve this issues and recude DSO is to implement Accounts Receivable Software, like Anytime Collect.

Anytime Collect is accounts receivable software, or AR software, at the unbeatable starting price of just $89 per month. Anytime Collect helps companies streamline accounts receivable collections and better manage accounts receivable credit and collections activities.

accounts receivable software helps businesses improve credit collections management systems and business processes. Most businesses can realize significant improvements by using an accounts receivable software. Anytime Collect represents:

  • Building work queues for collection representatives
  • Automating communication with customer accounts via mass email
  • AR software integration with popular ERP accounting systems
  • Collections letters and best practices are provided for in-house collections reps
  • AR software for automating activities to collect accounts receivable faster and easier than ever before

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