Days Sales Outstanding (DSO) Calculator
Days sales outstanding (DSO) measures the average number of days it takes a business to collect payment after a credit sale. A lower DSO means cash comes in faster.
- Days sales outstanding
- 30.4 days
How it works
DSO = (Accounts Receivable / Total Credit Sales) x Number of Days
Take your ending accounts receivable balance for the period, divide it by total credit sales for the same period, then multiply by the number of days in the period. Use 365 for a full year, 90 for a quarter, or 30 for a month.
Only include credit sales. Cash sales collect instantly, so counting them understates your real collection lag.
Worked example
A firm has $50,000 in accounts receivable and $600,000 in annual credit sales. DSO = (50,000 / 600,000) x 365 = 30.4 days. On average, invoices sit unpaid for about a month.
As a rule of thumb, a DSO under 45 days is considered healthy for most industries, and a DSO more than 25% above your standard payment terms signals a collections problem.
Frequently asked questions
- What is a good DSO?
- It depends on your payment terms. If you invoice on net 30, a DSO of 30 to 40 days is solid. Under 45 days is broadly healthy; consistently above 60 usually means collections need attention.
- How do I calculate DSO for a month or quarter?
- Use the same formula with the period's credit sales and set the day count to 30 or 90. Many teams track monthly DSO to spot trends early.
- How can I reduce DSO?
- Invoice immediately, offer digital payment, chase before the due date rather than after, and automate reminders. AR automation software handles the chasing for you.
- Does DSO include cash sales?
- No. Include only credit sales. Adding cash sales makes DSO look artificially better than your real collection performance.
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