12/29/2023 0 Comments Dailysales incMaybe the DSO isn’t a reflection of the product or the actual service, but rather how the client is handling their business. A faster, better service can lead to a reduction in the daily sales outstanding. They figure, “I had to wait long enough for the service to be completed they can wait a few more days to get paid.” Looking at ways to improve customer satisfaction could involve adding additional staff, streamlining services, or re-prioritizing tasks among employees. Is the company meeting customer demand for a product and/or service? Are the products or services being delivered late to the customer? Is there an issue with quality? These are all factors that could create a higher DSO.įor service-based businesses, unhappy clients are more likely to take their time paying an invoice if the service they received was late or unsatisfactory. If DSO is running high, there are certain areas of your business that you need to address to get to the root of the problem, including the product/service and the customer’s financial status.Ī company’s operations manager oftentimes holds valuable insight as to why customers are paying late. If you haven’t done so already, now is the time to involve management in your financial KPIs so everyone understands the impact of DSO. Here are a few ways you can take control of your DSO by focusing on internal processes. In reality, there is more to managing your DSO than just crossing your fingers and crunching the numbers. Logically speaking, a low DSO means that your customers are paying on time, whereas a high DSO indicates your business is missing out on working capital that could be put towards day-to-day operations. By dividing your accounts receivable by the annual revenue per day, you’ll have a better understanding of the average number of days it takes your business to collect from customers. Calculating your daily sales outstanding (DSO) is a relatively straightforward process.
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