What is Days Sales Outstanding?
DSO (Days Sales Outstanding) is the average number of days it takes for a company to collect its accounts receivables. For instance, if the DSO of a company is 45 days, it means that they are able to collect back their past dues within 45 days, approximately.
Why is DSO Critical for Your Business?
A business can measure its financial health with DSO. How fast a company can collect its receivables back indicates its impact on working capital. DSO is a critical metric because it can help you understand:
- Your average sales and accounts receivable status.
- How efficient your collections team is — based on that, you can optimize your credit policy.
