Achieving Optimal Dso In Order To Cash
What Is The Average Dso Period
As digital transformation takes place across industries, executives are looking for innovative solutions to optimize their organizations order to cash (OTC) cycle. From blending automation with existing process to digitalizing manual operations and automating the entire OTC lifecycle, companies are increasingly turning to digital solutions to streamline their OTC operations and improve overall performance.
One of the key performance metrics of any OTC process is average days sales outstanding (DSO). It measures the average length of time that company takes to collect payment after delivering goods or services. For any finance department, it is crucial to understand their organizations DSO performance in order for executives to make better decisions regarding resources, staffing and other cost-saving measures. You may think that DSO is mainly financial issue, however it is also associated with many other things like customer relationships and long-term outlook of an organization.
In this article, we will discuss how the emergence of order to cash solutions could significantly contribute to healthier and more efficient OTC process. We will discuss how implementing such solutions helps finance professionals easily access real-time financial data and use it to calculate the average DSO period.
The Importance of Calculating the Average DSO
The order to cash lifecycle comprises multiple processes, from invoicing and credit controls to collections and dispute management. Such processes involve multiple teams, complex systems and paper-based activities. To have better understanding of as well as visibility into an organizations OTC performance, it is important to be able to track and measure the financial metrics regularly.
Average DSO is among the most important performance metrics of any OTC process and helps executives to understand their organizations financial performance over time. Calculating average DSO on periodic basis helps executives to set organizational goals and create strategies to improve their DSO performance. It also helps them measure their performance against competitors in similar industries.
What is the Role of Order to Cash Solutions in Calculating the Average DSO?
Order to cash solutions are designed to help executives create more efficient and streamlined order to cash operations. They provide features such as automated billing, collections and cash application as well as end-to-end visibility into an organizations order to cash operations. Furthermore, they provide access to real-time financial data, which is essential for calculating and tracking the average DSO performance.
Order to Cash Solutions can greatly simplify the process of calculating average DSO and provide more accurate data by eliminating any manual data entry errors or overlapping of processes. Moreover, they offer analytics and reporting capabilities that help finance and operations teams gain valuable insights into their OTC process, allowing them to quickly identify key areas of improvement and set up or monitor performance goals.
Conclusion
Order to cash solutions are becoming increasingly popular among organizations as they provide access to accurate and real-time financial data, allowing executives to accurately calculate the average DSO period and gain better visibility into their entire order to cash process. By leveraging analytics and reporting capabilities of such solutions, finance teams can not only set up and monitor performance goals but also take proactive steps to optimize their OTC performance.
