Certified in Logistics, Transportation and Distribution (CLTD) 2026 – 400 Free Practice Questions to Pass the Exam

The crucial element in cash flow management is days sales outstanding (DSO) management. DSO refers to the average number of days that a company takes to collect payment after a sale has been made. Efficient management of DSO is vital for maintaining healthy cash flow because it directly impacts how quickly cash is available for operational needs. When DSO is high, it indicates that payments are slow, which can lead to liquidity issues, affecting the company's ability to meet its financial obligations.

By focusing on reducing DSO, a business can ensure it has adequate cash flow to cover expenses, invest in growth opportunities, and avoid potential cash crunches. This process often involves improving invoicing processes, closely monitoring accounts receivable, and implementing strategies for more effective collections.

While invoicing frequency, insurance cost analysis, and international trade tariffs can influence a business's overall financial health, they do not have the direct and immediate effect on cash flow management that effectively managing DSO does.