High DSO or Low DSO? Discover Days Sales Outstanding for a Healthier Cash Flow
Updated: May 24
Cash flow management is crucial for any construction business. As the owner, you understand the importance of maintaining your finances. One key financial metric is Days Sales Outstanding (DSO). It is the average time it takes for your company to collect payments after making a sale. In this blog post, we will explore DSO's true importance. Prepare to uncover the differences between high and low DSO, as well as their far-reaching impact on cash flow management. Stay tuned for our practical strategies to optimize your DSO, setting your construction business up for a thriving financial future.
Table of Content
What is DSO and why does it matter for construction businesses?
How to Maintain a Healthy DSO While Preserving Client Relationships
Practical Strategies to Optimize Your Days Sales Outstanding
What is DSO and Why Does It Matter for Construction Businesses?
DSO calculates the average days needed to collect payments from clients. It shows how quickly your company turns invoices into cash.
Why does DSO matter? It is a key player in your business's cash flow management. The swifter you convert those invoices into cash, the better equipped you'll be to cover expenses, seize new project opportunities, and keep your operations running like a well-oiled machine.
How to Calculate Days Sales Outstanding
To calculate DSO, divide your accounts receivable by your total credit sales, then multiply the result by the number of days in the period