DSO Case Study by Debt Nirvana, A Debt Collection Agency

The average no. of days a firm takes to collect the payment after the sales from the creditors is called DSO-Days of Sales Outstanding. The DSO can be calculated by :

DSO = (Accounts Receivables x No. of Days) /Net Credit Sales

Accounts receivable are the company's payments for sales made on credit. The longer the company takes to collect the payment, the higher the DSO will be.

Lower DSO means the firm takes a few days to collect receivables. Lower DSO is usually good for a firm. It helps a firm to run the working capital & operational cycle of the company smoothly. Higher DSO will lead to a cash flow problem in the company.

Lower DSO is essential for small enterprises. They require timely financial inflows for operations, personnel salaries, and other expenses. They cannot clear future payments unless they collect receivables on time.

Various factors affect the outstanding days of sales. Let’s have a look at it.

Factors affecting the DSO

1. Credit Policy of a firm 

2. Payment Terms by Sales Team

3. Economic Condition

4. Customer Payment Habits

5. Weak collection process

How does higher DSO affect your business?

1. Cash Conversion Cycle

2. Working Capital

3. Profitability

4. Risk of Bad Debts

5. Operational Inefficiency

6. Customer relations

Solutions for the DSO effects on a firm

1. Credit Policy Management

2. Error-free Invoice

3. Collection Process

4. Penalties

5. Collection Agency Outsourcing

Debt Nirvana as Debt Collection Agency

Debt Nirvana, a Debt Collection Agency has collected the DSO data across the world. Let’s have a look at this line graph.

These are the data collected by Debt Nirvana.

If we talk about the North American region, the debt nirvana helped firms reduce 90 DSO in 2020 to 18 DSO in 2024. However, in Europe, the Middle East Region experienced a decrease from 130 in 2022 to 60 in 2024. In the same way, in the Asia Pacific Region, DSO decreased to 90 from 150.

This chart describes the overall success of Debt Nirvana in helping firms to reduce their Days of Sales Outstanding. Firms can save millions of dollars annually with the reduction in Days of Sales Outstanding. For more information, contact Debt Nirvana at +91-9810010294 or email at rvm@debtnirvana.com.

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