You can see in the chart below that by collecting quickly on their accounts receivable, they increased their cash on hand, which investors see decreases the risk of investment into the company. A relatively low DSO calculation for your industry would result in premium valuations, whereas poorer DSO calculations mean you can expect a “haircut” to your valuation multiple.Ī good example of this is Dell. High and low DSO calculations can have a significant impact on the valuation of your business. Some also refer to DSO as the average collection period. You can review your DSO on a weekly, monthly, or quarterly and depends on how important steady cash flow is to your company. A Consistent system and collection follow-up can have a significant impact on DSOĭays Sales Outstanding, or DSO calculation, is a standard key performance indicator for the number of days it takes your company to collect payment after they have made a sale.It’s usually best to look at DSO in conjunction with ageing.“Good” DSO depends highly on your industry and payment terms.If you own a publically traded company, DSO can have a significant impact on your stock price.DSO calculation can be a useful tool to understand the health of your receivables.
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