. SKI’s days’ sales outstanding (DSO) of 45.63 days is well above the industry average (32 days). SKI’s customers are paying less promptly. So, SKI should consider tightening its credit policy to reduce its DSO.
Cash Discounts: Lowers price. Attracts new customers and reduces DSO.
Credit Period: How long to pay? Shorter period reduces DSO and average A/R, but it may discourage sales.
Credit Standards: Tighter standards reduce bad debt losses, but may reduce sales. Fewer bad debts reduces DSO.
Collection Policy: Tougher policy will reduce DSO, but may damage customer relationships.