Best Days Sales Outstanding, The Optimal AR Target - Funding Gates Blog
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Best Days Sales Outstanding, The Optimal AR Target


Are you feeling blue because you’re always looking at your past due AR? Look on the bright side! Best Days Sales Outstanding will tell you about payment habits of your best customers.

You’re already tracking DBT to measure delinquent AR and DSO for overall AR. Best DSO will help put these other metrics in context. Don’t get bogged down by your worst customers, it’s not all bad news! You have a customers who pay on time, you should let them set the target by comparing DSO with Best DSO. 

What is Best DSO?

DSO measures both current and overdue invoices, Best DSO measures only your current invoices. This provides you with an optimal level from which you can evaluate your overall DSO. The closer your DSO is to your Best DSO, the better your AR performance.  

Best Days Sales Outstanding (DSO) Calculation:

Screen Shot 2016-09-09 at 11.05.23 AM

Leverage Best DSO to Improve your AR:

Keep an eye on the gap between DSO and Best DSO. If there is a big difference, then you’ll want to reduce your overall DSO by:

  • Sending out timely consistent reminders and calls so that customers don’t become overdue.
  • If you’re already sending regular reminders, step up the frequency to twice or three times a week.
  • Offering multiple payment options so that it’s easy for your customer to pay.
  • Setting stricter payment terms for customers who have been late in the past.

The AR Analytics Dashboard in your Funding Gates Reports shows your Best DSO on a monthly basis. You can track it against DSO in the comparison chart. 

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