Accountability - manage company's DSO
If you’re like most small business owners, then you’re probably familiar with the concept of accountability. But you may not realize that accountability is also important when managing your company’s Days Sales Outstanding (DSO). It’s a metric that measures how long it takes your customers to pay their invoices. And while it’s important to track your DSO, it’s even more important to ensure that your customers pay their invoices on time. That’s where accountability comes in.
Importance of DSO in the financial health of a business
Days Sales outstanding is a metric used to measure the number of days that it takes for a company to receive payment from its customers. It measures how quickly a company’s customers are paying their invoices.
DSO is important because it can give you a good indication of your company’s financial health. A high DSO means it takes your customers a long time to pay their invoices, which can strain your cash flow. On the other hand, a low DSO means that your customers are paying their invoices quickly, which can help improve your cash flow.
The lower the DSO is, the more efficiently you can manage your business operations. Furthermore, it is applicable to the accounts receivable management and is a good indicator of how effective your credit and collections processes are.
Why is accountability important for managing DSO?
Accountability plays a vital role in managing DSO as it assures that your organization is following up on payments promptly and effectively. Besides, with proper accountability in place, you can easily identify potential risks or issues related to customer payments. After that, corrective actions are taken to mitigate those risks.
To manage your DSO effectively, it’s important to have a system that can track and monitor all customer payments. This system should also be able to generate reports so that you can easily see which invoices have been paid and which ones are still outstanding. This is only possible with an accountable system in place.
How to maintain a low DSO with accountability?
To maintain a low DSO, you need to ensure that all customer payables are accounted for, and payments are paid promptly. Here is how you can do this:
Track your customer credit risks
To do this, you need to identify the customer who is paying late or not paying at all. This will help you build a specific collection strategy and reduce the days of outstanding accounts. You should also have a stringent credit and collections policy that clearly defines when payment is due, how payments are made, etc.
Keep a good relationship with your customers
To keep your DSO low, you must develop a good relationship with your customers. Regular communication is important because it can help eliminate misunderstandings that may lead to customer payment issues. In addition, being proactive when sending out reminders can prevent your clients from experiencing a delayed payment altogether.
Put your customers first
Your customers should always be your top priority. You should go above and beyond to ensure their needs are met. If you make your customers happy, they will be more likely to pay their invoices on time. Accountability makes you reliable by highlighting your business goals and objectives. Moreover, it teaches you to be responsible for your actions and always to put your customers first.
Stay accountable to reap the profits!
Achieving low DSO can be challenging, but it is possible with the right system and approach. With accountability, you can better manage your business by tracking all customer payments and reminders. Next time you have a conversation with your customers, ask them if they are also paid. If there are any issues, you can always address them upfront and avoid any issues that may arise in the future.