Finance
DSO against the agreed term: how to measure it and what to do with it in negotiations
Published: 2026-09-22
Article written by Vytautas Natys, CEO, UAB NVGroup.
DSO is a metric every finance report carries, and one that is almost never used in negotiations. The reason is that it is an average.
What DSO does not tell you
Overall DSO merges the customer who pays in twenty days with the customer who pays in seventy. The result is a number that fits no conversation at all.
The second problem is that DSO is measured from the invoice date, not from the agreed term. A customer on an agreed sixty-day term who pays in sixty-five is five days late. A customer on an agreed thirty-day term who pays in forty-five is fifteen days late. DSO says the first one is “worse”.
What to measure instead
Three figures, per customer.
Days late from the agreed term — not from the invoice date. This is the only metric you can discuss with a customer, because it rests on what was agreed.
The accrued amount — interest plus fixed compensation over the period. This is the translation from days into euros.
The trend — whether the picture has improved or worsened over recent months. A customer whose delay is growing is a different conversation from a customer who is steadily five days late.
How to use it
In next year's contract negotiation the figure changes the nature of the conversation. “You pay late” is a reproach, answered with “everyone pays late”. “Over twelve months the average payment took forty-seven days against the agreed thirty, and that cost us X euros” is a fact that has to be answered on the merits.
The second use is pricing. If a customer systematically takes a longer term than agreed, they are getting credit whose cost is not in the price. There are two ways to deal with that: agree on the real term, or put the cost into the rate.
What not to do
Do not send an interest demand to every late-paying customer. It damages relationships faster than it brings in money, and it usually ends with the demand being withdrawn.
The figure is leverage. Leverage is used selectively and deliberately, not automatically.