How does DSO affect your company’s financial health?

Typically, a lower DSO is better for your company’s financial health because it means you get paid quickly for invoices and are less likely to face cash flow problems.

Can you forecast accounts receivable using DSO?

DSO is used to forecast payment of receivables, but not how much you’ll have in accounts receivable at any one time.

How do you calculate DSO for three months?

To calculate DSO for three months, use the same formula as annual DSO, but look at only revenues and average receivables for the past three months, then multiply by the number of days in those months.

What other metrics should be used along with DSO?

Alongside DSO, it’s a good idea to track your DPO and other working capital ratios.

About the Author

TJ Porter

TJ Porter

Personal Finance Writer

I have in-depth experience in reviewing financial products such as savings accounts, credit cards, and brokerages, writing how-tos, and answering financial questions both simple and complicated.

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