Accounts Receivables – Managing DSO

Wooo Hooo!  Made the sale, sent the invoice and feeling good!  Right?  Well kind of …

Remember an ‘invoice isn’t cash’ so don’t overlook the ‘getting paid’ portion of the sales agreement (Refer to tips below).

While it may seem obvious, many business owners become so consumed with making the sale that they fall short controlling the payment of the sale.  The result is their Net 30 payment terms unintentionally become Net 45, Net 60 or worse(!).

In business, DSO stands for days sales outstanding.  Accountants and bankers look to this for a reflection of a business’ performance and to get a sense of how healthy is its cash flow.  Critical during an evaluation process for a line of credit for example.

What else does DSO reflect?  YOUR performance as a business owner.  How well do you manage your cash in and out?  Don’t overlook the importance of Accounts Receivable or collecting what’s owed.

Tips:

  1. Use an electronic platform, like Quickbooks, to improve consistency and eliminate monthly ‘nagging’
  2. Work with clients to set up terms that match their processes to get their payments faster
  3. Invoice in smaller amounts and more frequently
  4. Use a cash management tool
  5. Better manage ‘and shorten’ DSO
  6. Image matters – particularly to the bank!

“Funders don’t sit with you to see if you’re sweating for cash. They let the story your financials tell do the talking when they evaluate your business.” Moira Vetter, Forbes contributor.

There is still time to prepare for upcoming 2017 equipment purchases and/or to create a practical cash forecast.  Call Chris today at (360) 303-5798 for your free consultation.

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