Days Sales Outstanding (DSO) Calculator
Calculate DSO — the average number of days it takes to collect payment — from accounts receivable and credit sales over a period.
How it works
DSO = accounts receivable ÷ credit sales × days in period · Receivables turnover = credit sales ÷ accounts receivable
Days sales outstanding is the average time it takes to collect cash after a credit sale. Divide receivables by credit sales and multiply by the days in the period. A lower DSO means faster collection and healthier cash flow; comparing it against your stated payment terms shows whether customers are actually paying on time. Rising DSO can signal loosening credit control or customers in trouble.
Worked example
With $90,000 of receivables against $720,000 of annual credit sales, DSO is 90,000 ÷ 720,000 × 365 = 45.6 days. On net-30 terms, that is about 16 days beyond terms — collections are running slow.
Frequently asked questions
What is a good DSO?
A common rule of thumb is that DSO should be no more than about 1.5× your payment terms — so under 45 days for net-30. It varies by industry, though; the trend and the gap versus your terms matter more than any absolute number.
Should I use total sales or credit sales?
Use credit sales only. Cash sales are collected immediately and are not part of receivables, so including them understates DSO. If you cannot separate them, total sales gives a rougher approximation.
How do I reduce DSO?
Invoice promptly and accurately, tighten credit terms for slow payers, offer early-payment discounts, and follow up systematically on overdue accounts. Faster collection frees cash that would otherwise sit in receivables.
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Educational estimate, not financial advice.