Global Average DSO Hits 66 Days, Expected to Increase in 2018

Trustworthy relationships between companies and customers have boosted the global average Days Sales Outstanding (DSO) to a 10-year high, which credit insurer Euler Hermes recorded at 66 days in 2017. According to its May 5 report, Euler Hermes predicts the global average to reach 67 days by the end of this year.

The annual review and forecast was based on a sample of 20 sectors and 36 countries. Although both business-to-business (B2B) and business-to-consumer (B2C) are reviewed, Euler Hermes said DSO among B2Bs was higher, particularly in aeronautics, automotive, construction and electronics. The report showed DSO expansion at a high of at least 85 days in the electronics, machinery and construction sectors.

“The global recovery distracts attention from DSO and hence comes with a significant deterioration in payment terms,” Euler Hermes Chief Economist Ludovic Subran said in a press release. “We expect global average DSO to rise again … due to confidence in the economic and financial outlook fueling this dynamic.”

Euler Hermes’ report explains that companies are trusting their customers to eventually pay, therefore, easing payment terms. Companies that were once stringent during the economic struggle in 2007 and 2008—DSO at 60 days in 2008—are now giving customers more time to pay. In 2017, one in four companies were paid in less than 31 days, while one in four were paid after 90 days.

“Now that the world economy is doing better, companies tend to trust their clients to pay them—despite the increase in insolvencies of large companies,” the report states.

During an assessment of DSO from country to country, Euler Hermes found the U.S. was among the seven strongest countries at no more than 51 days, the lowest DSO recorded in New Zealand at 43 days. DSO was more relaxed in France (74), Italy (83) and China (92). A quarter of companies in China have a DSO of 136 days.

-Andrew Michaels, editorial associate