I have met several prospects and new clients who do not know how to calculate their Daily Sales Outstanding (DSO).   DSO for the uninitiated is the measurement that tells you how quickly you collect your cash.  It is calculated as follows:

DSO = (Receivables/Sales) * Days in Period

So when you know your DSO, then what?

You want to manage it to the lowest number possible.  Why?  Good question.

Assume you are an $8 million dollar company who has a DSO of 80 days.  Also assume that the average DSO for your industry is 40 days (not untypical for many industries).

Given the above scenario your company is financing its customers to the tune of $875k (40 days) – interest free!  Your cash in their pocket. 

I am working with clients to lower their DSO.  In the above scenario, each day the DSO is lowered toward the average translates into approximately 29k. Not bad – especially if you consider that you are only approaching "the average."

Know your DSO – your cash flow is depending on it.