Upfront: DSO Hits 10-Year Low

U.S. businesses are getting their A/R act together. According to the Credit Research Foundation (CRF), which tracks key performance measures for U.S. companies' accounts receivable, median days sales outstanding for 2005 was 40.5, the lowest in 10 years and down sharply from 45.6 in 2001. Best possible DSO, a metric that's strongly correlated to businesses' terms of sale, fell by nearly two and a half days from 2004 to 2005. These results suggest that American businesses are realizing improved efficiency in their A/R processes, according to CRF. Factors driving the trend include the favorable impact of policies implemen-ted in response to Sarbanes-Oxley, improvements in customer service, and greater utilization of enterprise technology. "Technologies such as improved ERP systems have made the order process better, reducing the errors that result in customer deductions, which lead to extended DSO," notes Terry Callahan, CRF president.

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