Which statement about days in accounts receivable (DSO) is true?

Which statement about days in accounts receivable (DSO) is true?

• A. DSO represents the average number of days to collect payments; lower DSO indicates faster cash flow.
• B. DSO is the total annual charges divided by total claims submitted.
• C. DSO measures how many days the clinic is open per month.
• D. DSO is the average days a claim remains unpaid after denial.

Answer: (A)

DSO, or days sales outstanding, measures how long, on average, it takes to collect payments after services are provided. It directly reflects cash flow efficiency—the smaller the DSO, the faster payments come in and the stronger the clinic’s liquidity. This concept isn’t about the total amount charged or billed, the number of days the clinic is open, or the timing after a claim is denied. Instead, it focuses on the time dimension of revenue collection. A practical way to think about it is how many days the accounts receivable remain outstanding, with lower numbers indicating quicker collection and healthier cash flow.

DSO, or days sales outstanding, measures how long, on average, it takes to collect payments after services are provided. It directly reflects cash flow efficiency—the smaller the DSO, the faster payments come in and the stronger the clinic’s liquidity. This concept isn’t about the total amount charged or billed, the number of days the clinic is open, or the timing after a claim is denied. Instead, it focuses on the time dimension of revenue collection. A practical way to think about it is how many days the accounts receivable remain outstanding, with lower numbers indicating quicker collection and healthier cash flow.