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eNews Poll: 45% of Credit Departments Report Increased DSO

NACM's recent eNews poll on Days Sales Outstanding (DSO) shows 45% of credit departments have seen an at least 5% increase within the past year. 20% say DSO has decreased and 35% report that DSO levels remained the same.

Nathan Hutton, CICP, global credit manager at Donaldson Company, Inc. (Minneapolis, MN) has seen a fairly stable DSO over the past year with customers in the U.S. and Latin America. "Regionally we are seeing improvements in APAC [Asia-Pacific] as China Covid lockdowns were having a significant impact—whereas we are seeing upward pressure in EMEA [Europe, Middle East, Africa] due to the war in Ukraine and the negative impact trade restrictions are having on our ability to sell into Russia and collect money."

Many factors can weigh on DSO, including inflation, supply chain delays and events outside the control of the credit department. The pandemic caused suppliers to stretch credit terms for their customers, but within the past year, suppliers reverted to standard payment terms. An increase in DSO could mean that customers are having trouble adjusting back to standard terms.

But a higher DSO is not always a bad thing. "Businesses that operate with a high level of trust and strong credit management practices tend to offer longer-term payment opportunities for their customers, therefore increasing their DSO," according to Atradius. "Moreover, some businesses with a higher DSO often have strong relationships and a solid foundation of open communication with their customers." Download our white paper, Keep DSO in Its Place, to learn more about the different ways to measure DSO and the pros and cons of each. 

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Friday, 29 March 2024

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