DSO (Days Sales Overdue) and What it is

Days Sales Overdue or DSO relates to the average number of days it takes for you to receive payment after invoicing your customer.

It is important for your company to know what your average DSO is, because it will demonstrate your efficiency and overall profitability.

A high DSO shows you that your company is not collecting payments quickly enough. Knowing your DSO is your starting point to finding out what you can improve on.

A low DSO shows that your company collects its payments (receivables) quickly.

Lets say that your payment terms are 30 days. If your DSO average is 62 then your company has room for improvement.

Many companies keep their DSO low by enlisting the help and knowledge of an experienced Credit Controller to stay on target.

3 Ways to improve your DSO:

  1. Invoice your customers right away. The faster they get the invoice, the faster they are likely to pay you.
  2. Stop working with customers who you constantly have to chase for payment. Chasing customers for payment for a product or service you have already provided costs you more time and more money. Work out if it is worth keeping that customer who won’t pay on time.
  3. Think about reducing your payment terms from 60 days to 30 days, or 30 days to 14 days. For example, inform your customers on all invoices that payments are now required in full within 14 days of the invoice date.

If you would like help to improve your DSO and increase your cash flow, contact one of our team here at Franklin James about outsourced credit control.

Free DSO Calculator - Work out your DSO here