If your company’s like most, you’ve noticed that some customers have started dragging their feet a bit about paying your bills (sometimes more than a bit).
Times like these are when you find out just what your collection policies — and your collectors — are made of. Your DSO is a great report card for both.
Naturally, different industries have different standards. But compare your DSO rates against the national averages:
If you’re looking to drill even deeper, your organization will want to turn to the second incarnation of the old stand-by: Best Possible DSO. Because you calculate it this way (Current Receivables/Total Credit Sales) x Number of Days, you get some extra insight into delinquencies.
See how your Best Possible DSO stacks up against what your peers are reporting:
No need to choose one over the other — measuring both is your best bet. The closer your DSO is to your Best Possible DSO, the closer your receivables are to an optimal level.