Days sales outstanding (DSO) is a financial metric that measures the average number of days a business takes to collect payment from its customers after a sale. It is an important metric for CFOs to monitor as it provides insight into a company’s cash flow and working capital management. A low DSO enables a company to use its full financial potential, manage financial risks, and prevent financial losses and insolvency. On the other hand, a high DSO can lead to cash flow problems and negatively affect a company’s profitability. Optimizing DSO can be challenging due to factors such as customer behavior and customer disputes, but implementing strategies such as adjusting payment conditions, optimizing invoicing, and investing in accounts receivable automation software can improve cash flow and reduce DSO. By effectively managing DSO, companies can benefit from improved cash flow and increased profitability.
Reducing Days Sales Outstanding and Boosting Cash Flow: A Guide
