Days sales outstanding

So in other words, you do the work, you send out an invoice, your customers pay you in thirty days because you give them thirty-day terms.

That means you have a DSO, days sales outstanding, on your invoices of thirty days, right? If you send out an invoice and it takes sixty days for your customers to pay you, that means you have a DSO of sixty days.

For some businesses that I've worked with, their DSO is out of control.

I worked with this contractor years ago.

They came to me.

Their DSO was over two hundred days.

Think about it.

They did work, and then two hundred days later, they got paid for the work.

I am excited to welcome Bill, founder of Ready, Set, Collect, who brings nearly four decades of excellence in the credit and collection industry.

Bill helps businesses collect their own money more effectively, improve cash flow, reduce DSO, identify collection damage signals, and train their team to have better conversations with customers while preserving those relationships.

Bill, welcome to Unwrapped with Gifts.

It's a great pleasure to have you here on the show.

You have spent nearly 40 years in credits and collections.

What first drew you into this field and what has kept you passionate about it for so long?

What I want to just do real quick, when your introduction, you referred to DSO.

And for your listeners, I want to give some clarity with respect to what that is.

Instead, you want specificity.

What I want to hear from people, let's just say I go to an accounting manager and say, what does success look like in their role? I want them to say, A DSO, day sales outstanding ratio on accounts receivable, I want them to say a DSO of 35 days or less, under billings less than 15 days, a current ratio greater than 1.1, you get the point, right? So they can specifically describe what does success look like in their role.

But most businesses don't have this.

They don't have this infrastructure.

Okay.

The metric to track here is DSO or days sales outstanding.

This is the average number of days it takes your company to actually collect the cold, hard cash after the sale is completed.

Because in the industrial world, nobody is just swiping a credit card at a cash register.

You have to ensure liquidity without destroying your reputation.

OK, so we have these three distinct metrics.

Days, inventory outstanding, days sales outstanding.

and days payable outstanding.