DSO, Days Sales Outstanding

DSO (average number of days required to collect credits) is the indicator used to measure credits in days of sales still to be collected.
The formula used to calculate it is the following:

DSO = Credits ÷ Daily Sales

To calculate DSO it's important to take into account that daily sales can not be constant, because of seasonality or other factors.
To solve this problem a backwards calculation that consists in deducting the previous months sales volume and a proportional quota on the remaining part can be made.

For the graphic example consult this Excel file containing the calculating function "DSO Count-back" and the comparison with other DSO calculation methods.

→ Subscribers to our NEWSLETTER will receive an Excel file for DSO calculation as a gadget. 


BPDSO, Best Possible Days Sales Outstanding:

BPDSO (best average number of possible days required to collect credits) is obtained using the same criteria and formulas to calculate DSO.
It's only based on unexpired credits. This indicator represents the quality of granted terms of payment.
It's noted that BPDSO dimension derives from the commercial negotiation outcome and debt collection can only intervene on the difference between DSO and BPDSO.


Collection Target:

It represents the collection objective attributed to a person or an organization (collector, seller, office, debt recovery agency) on debtors of their competence in a determined period of time.
The aim of the target is to provide objectives that are "measurable".
The collection target system is a procedure with a regular interval (weekly/monthly/quarterly) that allows the attribution of objectives at company level, subdividing them on underlying levels (business units, sellers, collector), following definite and share principles.
The system generates the appropriate reporting, informing every person of the distance from its target and allowing to measure the quality of achieved goals.


Clients rating and dynamic credit limit calculation:

The constant change of today economic environment requires the ability to attribute a credit limit to every client, limiting the company's exposure. This credit limit is calculated monthly, in a dynamic way and using company information. In its definition it should be considered our role as suppliers towards the client.
The basis to attribute credit limit is made up by single client rating, calculated on the basis of all available information. Final aim of clients rating is to attribute a wider credit limit to worthier clients, reducing risk towards those less reliable. Therefore a proper credit risk management is guaranteed.

Our platform Risk is a useful supporting tool to achieve these goals.



It's defined ageing "the analysis of credit seniority" that can be "expiring" or "expired". Ageing is an analysis tool to manage credit: it can be very useful for those responsible for credit management, for sales management or sales network.
Fundamental to define clients specific deliquency rate, ageing can be total or display receivable balance for client, divided in credit ranges.
Within ageing we distinguish:

  • Expiring credits, for which payment term is not expired yet. In this way creditors are on schedule or they are given a deferred payment
  • Expired credits, for which payment term is over. These credits are unpaid upon expiration. Expired credit can be of short, medium or long term.

Ageing on expired credits verifies how effective debt collection activities are and can help understand when expired credit can no longer be managed internally but has to be entrusted to third parties.
Ageing on expiring credits has a supporting function to financial planning, allowing to estimate future proceeds.
Expired credits + expiring credits = client's accounting balance


Whereas it's defined "ageing history" the analysis of credit seniority development in the last 12 months.

For an example of the ageing trend see this Excel file.


Claims management:

Claim is defined as "a non-compliance or a warning caused by a disservice".
Often the claim has an impact on credit management: the Collector shall not solicit the client but verify claim's causes and its validity, internally.
A claim can come from different business areas: there are cases where the product is not received, exceedance during delivery, receiving of a different product from what indicated on the consignment note, claims on product quality, damaged product, non-application of previously established discounts, invoices completed in a wrong way, etc.

Designed to ease claim management, our platform Claims helps the solver in all stages of the process.


Pareto report:

"The majority of effects is due to a restricted number of causes"
The Pareto Principle is a method for representing, through algorithm, primary aspects of a problem.
Using Pareto Report you can focus on the key elements in order to solve and facilitate analysis, decision making processes and quality management. Pareto helps create an order of intervention on a problem according to the given priority.
The Pareto Principle states that the majority of problems (80%) is due to a limited number of causes (20%): that's why we generally refer to 80/20 law.
By applying the Pareto Principle to credit management it would be possible to identify the most important clients on which intervene: solving 20% of the causes (in this case clients) would have a repercussion on 80% of problems (possible delays in payment).