Cash flow in any business is essential to maintain investment and growth. Days Sales Outstanding (DSO) can be a barometer of customer satisfaction.
Happy customers tend to pay on time bringing the DSO score down, but unhappy customers taking longer to pay bills negatively affecting the score. A worsening DSO score is a worrying sign as it may indicate customer frustration leading to rising costs of operation for the organisation in dealing with queries and chasing non-payment.
Typically, a DSO score under 45 is considered low but varies depending on the industry. The B2C retail sector is very low at 18 with cash purchases and direct debits the norm. But looking across B2B industries in the UK, utilities and energy operate at around 50-52, Construction 50, Business Services 55, Electronics 72 and Automotive at the top end at 86 days before accounts are settled.
The UK is in the top quartile of countries for debt management with a country average of 52 Days Sales Outstanding, but falls behind the U.S. and Canada, Austria, Finland, Denmark, Sweden, South Africa and New Zealand – the best at 47. China trails the table at 92*
*Euler Hermes Global DSO report 2019