See how many days it takes to collect payment for services.
About this report
- The DSO (Days Sales Outstanding) Report tells you the average number of days it take you to collect payment for services. It is also known as the "average collection period report".
- This report is available for companies with PointClickCare DataRelay.
How we calculate the DSO Report (Says Sales Outstanding)
- To calculate the DSO, we divide the AR (accounts receivable) as of the last day of the month by the Revenue for that month, and then multiply the result by the number of days in a month.
- Where
- AR (Accounts Receivable): for all Service Months, as of Posting Date for the month selected in the report
- Revenue: for the one Service Month selected, for all Posting Dates
- average number of days in a month: is 365 / 12 = 30.4 days
- Example:
- As of 6/30/24 your total AR was $1,000,000.
- During the period 6/1/24 to 6/30/24 your revenue was $800,000.
- The average number of days in a month is 365 / 12 = 30.4 days
- Therefore, your DSO = ( 1,000,000 / 800,000 ) x ( 365 / 12 ) = 38 days DSO
What the numbers tell you
- A high DSO number (e.g. 180 days) suggests that a company is experiencing delays in receiving payments, which can result in a cash flow problem.
- A low DSO (e.g.7 days) indicates that the company is getting its payments quickly. That money can be put back into the business to good effect.
- A negative DSO (e.g. -10 days) indicates a credit posting. Meaning, instead of posting revenue that month, you posted a credit. The negatives can be ignored, because the DSO average is weighted (by the number of dollars they represent).
- Different Payer Types have different DSO averages, depending on how quickly they pay based on their contract with you (or government regulations). Therefore,
- It's best to compare the DSO within a particular Payer Type across different months, or across different locations (since you're comparing apples with apples).
- It's less helpful to compare DSO across different Payer Types, since that may due to factors you cannot control.
Applications of Days Sales Outstanding
Days sales outstanding suggests how efficient the company's collections department is, and the the length of time payers are taking to pay you.
Looking at a DSO value for a company for a single period can provide a good benchmark for quickly assessing a company’s cash flow. However, trends in DSO over time are much more useful. They can act as an early warning sign of trouble.
Limitations
If you don't write off AR, then you will have a large DSO. Even though your collections team is doing a good job.