Accounts receivable (AR) is the total amount of money owed to a business by its customers for services already performed but not yet paid for. High AR means cash is tied up in unpaid invoices rather than available for payroll, materials, and growth. The key AR metric is days sales outstanding (DSO) — the average number of days it takes to collect payment. Field service businesses should aim for DSO under 30 days.
A field service company has $18,000 in outstanding invoices at the end of the month. Their average monthly revenue is $24,000, so their DSO is ($18,000 / $24,000) x 30 = 22.5 days, indicating healthy collection speed.
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