8 Steps to Reduce DSO
- Ensure Accurate and Timely Billing. ...
- Comply with Customer's Invoicing Requirements. ...
- Offer Early Payment Incentives and/or Late Payment Penalties. ...
- Have Clear Payment Terms. ...
- Do Due Diligence when Extending Credit. ...
- Walk Away from Bad Customers. ...
- Be Proactive in Reminding Customers when Payments are Due.
How can we improve DSO?
How to Reduce Days Sales Outstanding in Accounts Receivable
- Gather data about current DSO status. ...
- Focus on customer credit. ...
- Define customer payment terms. ...
- Look at invoicing processes. ...
- Manage accounts receivable carefully. ...
- Keep up the momentum.
How is DSO improvement calculated?
How Do I Calculate DSO?
- (Accounts Receivable / Total Sales) x Number of Days = DSO.
- ($25,000,000 / $200,000,000) x 365 = 45.63 days.
- ($65,000,000 / $40,000,000) x 31 = 50.37 days.
