How To Calculate Days Sales Outstanding in AccountingSeed | Arithmix

As an accountant, you may be familiar with the term "Days Sales Outstanding" or DSO. DSO is a financial metric that measures the average number of days it takes for a company to collect payment from its customers after a sale has been made. Calculating DSO can be a useful tool for assessing a company's cash flow and overall financial health.

What Is Days Sales Outstanding?

Days Sales Outstanding is a measure of the average number of days it takes for a company to collect payment from its customers after a sale has been made. This metric is calculated by dividing the total accounts receivable by the average daily sales. The resulting number represents the average number of days it takes for a company to collect payment from its customers.

For example, if a company has $100,000 in accounts receivable and its average daily sales are $10,000, its DSO would be 10 days. This means that, on average, it takes the company 10 days to collect payment from its customers after a sale has been made.

When Is It Valuable To Calculate Days Sales Outstanding?

Calculating DSO can be valuable for a variety of reasons. For one, it can help a company assess its cash flow and overall financial health. A high DSO can indicate that a company is having trouble collecting payment from its customers, which can lead to cash flow problems and potentially even bankruptcy.

Additionally, DSO can be a useful tool for benchmarking a company's performance against industry standards. By comparing its DSO to that of its competitors, a company can gain insights into how it is performing relative to others in its industry.

Finally, DSO can be a useful metric for identifying potential areas for improvement. For example, if a company has a high DSO, it may want to consider implementing stricter credit policies or offering incentives for customers to pay their bills more quickly.

In conclusion, calculating Days Sales Outstanding can be a valuable tool for assessing a company's cash flow and overall financial health. By understanding what DSO is and when it is valuable to calculate, accountants can help their clients or companies make informed decisions about their financial strategies.

How Do You Calculate Days Sales Outstanding in AccountingSeed

AccountingSeed itself isn’t naturally geared towards letting you calculate complex metrics like Days Sales Outstanding. As an alternative, teams typically use products like Arithmix to import data from AccountingSeed and build out dashboards.

What is Arithmix?

Arithmix is the next generation spreadsheet - a collaborative, web-based platform for working with numbers that’s powerful yet easy to use. With Arithmix you can import data from systems like AccountingSeed, combine it with data from other systems, and create calculations like Days Sales Outstanding.

In Arithmix, data is organized into Tables and referenced by name, not by cell location like a spreadsheet, simplifying calculation creation. Data and calculations can be shared with others and re-used like building blocks, vastly streamlining analysis, model building, and reporting in a highly scalable and easy to maintain platform. Data can be edited, categorized (by dimensions) and freely pivoted. Calculations are automatically copied across a dimension - eliminating copy and paste of formulas.

Arithmix is fully collaborative, giving your entire team access to your numbers and the ability to work together seamlessly.

Calculating Days Sales Outstanding in Arithmix

Calculating metrics like Days Sales Outstanding is simple in Arithmix. Once you've created your free account, you’ll be able to import your AccountingSeed data, and use it to create natural language formulas for metrics like Days Sales Outstanding.

Arithmix is designed to give you the power to build any calculations you want on top of your AccountingSeed data, while also being easy to use and collaborate on. You can share your dashboards with users inside and outside of your organisation, making it easy to empower your whole team.