Days Sales Outstanding (DSO)

Eight questions to find the Gap

Can you (or your delegate) answer most questions/statements with a strong 'yes'?

  1. Do you have any Cash Conversion Cycle (CCC) metrics linked to the compensation of management/sales boni?

  2. Did you update your guidance to sales personnel about accepting payment terms in the last 5 years, considering the massive change in interest rates in all global markets? Are they trained in payment terms?

  3. Do you have payment terms maximum thresholds for sales contracts of 30 or whatever days are customary in your industry (and is it monitored with automatic tracking in your CRM, ERP, or whatever other order tracking system you use)?

  4. Do your salespeople understand the cash flow benefits of pre-payments (…having a negative CCC - meaning: getting paid, before you pay)? Are they incentivised?

  5. Do you measure the difference between contractual payment terms & actual payment by your Accounts Receivable department?

  6. Do you manage cash collection via Accounts Receivables rather than Sales?

  7. Do you have regular over-due reporting with time-based escalation paths for resolution? 

  8. Do you track On-time-delivery performance in the context of DSO / CCC? And if so, do you have consequence management linked to it? 

If you answered ‘yes’ to most questions, great!

You have your DSO and this part of the cash flow under control.

If you answered ‘no’ or are unsure about it, you might have a gap - an excellent opportunity to improve your cash flow and working capital.

Feel free to get in contact for an exploratory dialogue with helmig advisory AG to assess the art of the possible.

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Days On Hand (DOH) - Inventory reduction