An improvement in this area could result in a lower DSO and reduced risk. It may be that the greatest risk to your accounts receivable is not a customer, but rather your business's internal collection processes. How successful your business is at cashing in invoices?.How many customers pay within the agreed credit period and how many fall in arrears?.How the ratio stands compared to your industry's average - if your company's DSO is much higher or lower than the industry average are you offering payment terms that are more or less risky than your competitors?.How the ratio has changed within the past years/months?.Regularly checking your DSO will help you check: DSO formulaĭSO = (accounts receivable / total credit sales) x number of days Many businesses calculate their DSO on a regular basis, monthly, quarterly or annually. Then multiply this figure by the number of days in the period you are assessing. To calculate your DSO first divide your total accounts receivable by the total value of your credit sales. The average time in terms of days between invoicing and payment is your DSO and is a good indicator of the efficiency of your receivables management. ![]() Has there been an increase in insolvencies and is your sector more vulnerable following the outbreak of the coronavirus pandemic? It may be worth seeking guarantees to help protect your accounts receivable from the risk of customer insolvency. It is also worth paying attention to any insolvencies in your sector.
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