DSO Calculation Helps Companies Track Their Efficiency
Dso calculation is a figure used to measure how long a company takes to collect on its receivables. It can be used to judge the efficiency of the accounts receivable department of a company. Companies that strictly deal with cash will have a DSO calculation of zero, while companies that invoice their customers will typically have a very high calculation. It should be noted that while DSO Calculation can be used to measure the efficiency of an accounts receivable department, it is not a good indicator of its effectiveness. For instance, if a company has an increase in sales, the DSO Calculation will be higher, even if the overdue balance stays the same. The goal of a company should be to have all debts paid in a timely fashion. A better measure in this situation would be to measure the days outstanding.