Hope that helps.Īlthough DSO is a widely accepted metric used in assessing collection effectiveness/capability/performance (as noted above in a few responses), it merely reveals how long it is taking for your customers to pay you.

IDK whether that is a 'best practice', but it seems like it would a)reduce your overall DSO, b)increase your cash flow (rarely a bad thing) and c)make DSO a more broadly understood and therefore more meaningful measurement within your company. However, heeding the CFO in me again, I would say that only measuring based on billed customers will likely lead to confusion amongst management b/c the constant question will be 'wait, have we billed them yet.?', or simply 'okay, which of our deals does this DSO assumption cover?' My two cents (and I may owe you some change) would be to increase your billing frequency and use a DSO calc that includes all closed deals, knowing that you don't need to carve any deals out of the calculation. And that so long as you used this to understand your DSO of only billed customers, you should be in good shape. Interestingly, by excluding unbilled revenue one would think that you would remove the measurement bias of your once-monthly invoicing behavior. To wit (and I'm sure you realize this), the same invoice you could send on the 1st of the month gets delayed to the 31st, thus adding 30 'shadow' days to your receivable and increasing your DSO. To say nothing of the very real delay this causes in your receivables.

Well, the fact that you only send invoices at the end of the month is a major factor in this.

Dso calculation template excel