The best possible days sales outstanding (DSO) is the theoretical DSO (the average days it takes to collect payment for sales) if no payments were ever late. It indicates the average best-case scenario payment cycle if all customers paid on time.
The best possible days sales outstanding (DSO) is the theoretical DSO (the average days it takes to collect payment for sales) if no payments were ever late. It indicates the average best-case scenario payment cycle if all customers paid on time.
Calculate best possible days sales outstanding with a DSO formula using current receivables that are not past due.
The best DSO formula is:
Best days sales outstanding (DSO) = Current accounts receivable / Total credit sales x Number of days
For example, if your standard DSO, which is based on current and past due invoices, is 40 days, then customers usually take 40 days to pay their invoice. However, if you have a best DSO of 20 days, then your customers that pay on time usually settle invoices within 20 days of receipt.
It is important to understand the best possible days sales outstanding because this helps you find ways to improve accounts receivable processes, which can increase cash flow. Best DSO offers insights into:
Improve Accounts Receivable management – Discover how efficient your payment collection process is. A comparison of the standard DSO and best DSO reveals the extent of payment collection efficiency. Accounts receivable automation can speed up collection efforts.
Talk to our specialists to learn how Apruve can reduce fixed credit & A/R costs and team effort by over 50%.
