How To Calculate DSO in Wave Accounting | Arithmix

Calculating DSO (Days Sales Outstanding) is an important metric for any business owner. It helps you understand how long it takes for your customers to pay their invoices, which in turn helps you manage your cash flow. In this article, we'll explain what DSO is and when it's valuable to calculate it. We'll also give you step-by-step instructions on how to calculate DSO in Wave Accounting.

What Is DSO?

DSO is a measure of the average number of days it takes for a business to collect payment from its customers after a sale has been made. It's calculated by dividing the total accounts receivable by the average daily sales. The result is the number of days it takes for a business to collect payment from its customers.

DSO is an important metric for any business because it helps you understand how long it takes for your customers to pay their invoices. If your DSO is high, it means that your customers are taking a long time to pay their invoices, which can negatively impact your cash flow. On the other hand, if your DSO is low, it means that your customers are paying their invoices quickly, which can positively impact your cash flow.

When Is It Valuable To Calculate DSO?

It's valuable to calculate DSO on a regular basis because it helps you manage your cash flow. If your DSO is high, it means that you may need to take steps to encourage your customers to pay their invoices more quickly. This could include offering discounts for early payment, sending reminders to customers who have outstanding invoices, or even implementing a stricter payment policy.

Calculating DSO is also valuable when you're trying to evaluate the financial health of your business. A high DSO can be a sign that your business is struggling to collect payment from its customers, which could indicate underlying financial problems. On the other hand, a low DSO can be a sign that your business is financially stable and has a strong cash flow.

How to Calculate DSO in Wave Accounting

Calculating DSO in Wave Accounting is easy. Here are the steps:

1. Log in to your Wave Accounting account.
2. Click on the "Sales" tab.
3. Click on the "Aging" sub-tab.
4. Look at the "Total Due" column to find the total amount of accounts receivable.
5. Divide the total amount of accounts receivable by the average daily sales to get your DSO.

It's important to note that the average daily sales should be calculated by taking your total sales for the past year and dividing by 365 (or the number of days in the year).

By following these simple steps, you can easily calculate your DSO in Wave Accounting. Remember, calculating DSO on a regular basis can help you manage your cash flow and evaluate the financial health of your business.

How Do You Calculate DSO in Wave Accounting

Wave Accounting itself isn’t naturally geared towards letting you calculate complex metrics like DSO. As an alternative, teams typically use products like Arithmix to import data from Wave Accounting 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 Wave Accounting, combine it with data from other systems, and create calculations like DSO.

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 DSO in Arithmix

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

Arithmix is designed to give you the power to build any calculations you want on top of your Wave Accounting 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.