Improve Your Cash Flow
Days Sales Outstanding (DSO) is an average measurement of how long a business takes to collect payment after making a sale. Unless you collect payment in full at the point of sale, then your business has an average DSO. Every business, big or small, can improve cash flow by reducing its DSO.
Another advantage of reducing your DSO is that the business will generally incur less interest expense over the long term, since the business will need less short term debt to stay afloat while the receivables catch up. Conversely, a high DSO translates to greater interest expense, and can indicate fundamental problems in the way a company manages accounts receivable.
Your A/R department can reduce its DSO by streamlining accounts and collection procedures. Following these tips will help you get your DSO and accounts receivable department into optimal shape:
Inevitably, there will be some accounts that need to go to collections. As part of a comprehensive receivables management plan, every business should have a relationship with a professional debt collection law firm. The best time to find the right debt collection law firm for your business is before you need legal collection assistance. The beauty of having a collections attorney relationship in place is that you can forward delinquent accounts seamlessly and easily, as often as needed.