Calculate how many days, on average, it takes to collect your accounts receivable.
Days Sales Outstanding (DSO) measures accounts receivable relative to credit sales. It expresses the receivable balance as a number of days of sales.
Businesses use DSO to monitor collections and how much revenue remains tied up in accounts receivable. It is an aggregate figure, not the exact age of individual invoices.
DSO = (Accounts Receivable ÷ Credit Sales) × Number of Days
Accounts receivable: $250,000. Credit sales: $1,000,000. Period: 90 days.
($250,000 ÷ $1,000,000) × 90 = 22.5
DSO = 22.5 days
The standard DSO formula uses credit sales because cash sales do not create accounts receivable.
If your accounting data does not separate credit sales from total sales, total sales may sometimes be used as an approximation, but the result should be interpreted accordingly.
DSO can be calculated over different periods. Use the same period when you compare results over time.
A higher DSO means accounts receivable are larger relative to credit sales. It can indicate slower collections, longer payment terms, changes in customer mix, or other factors.
A lower DSO means accounts receivable are smaller relative to credit sales. It can reflect faster collections, shorter payment terms, more cash sales, or other differences in the business.
DSO and invoice payment terms measure different things. Net 30 tells a customer when an invoice is due. DSO measures accounts receivable relative to sales across the business.
A company with Net 30 terms and a DSO of 42 days has a receivable balance equal to approximately 42 days of credit sales. Use the Invoice Due Date Calculator to turn payment terms into a due date.
DSO and average collection period are often used the same way: both describe how quickly receivables convert to cash relative to sales. The formula on this page is the common calculation for both.
DSO is a single aggregate metric. An accounts receivable aging report groups individual receivables based on how long they have been outstanding.
Put the next invoice together in the Invoice Generator. For more on this metric, see Days Sales Outstanding and Accounts Receivable. Set due dates with the Invoice Due Date Calculator or Invoice Payment Terms. If an invoice is overdue, use the Late Payment Fee Calculator or browse All Calculators.