Head of Finance Solutions
Days sales outstanding (DSO) measures how many days, on average, it takes customers to pay you after a sale. The formula is: DSO = (Average Accounts Receivable ÷ Total Credit Sales) × Number of Days. Lower is better — it means cash comes back faster.
DSO = (Average Accounts Receivable ÷ Total Credit Sales) × Number of Days. Average AR is usually (opening AR + closing AR) ÷ 2, and you measure over the same period as sales — commonly 30 or 90 days.
Say your average accounts receivable over 90 days is US$45,000 and your credit sales over the same period are US$90,000. DSO = (45,000 ÷ 90,000) × 90 = 45 days. On average, cash takes 45 days to come back after a sale.
A healthy DSO is close to your payment terms plus a small delay. If your terms are 30 days, a DSO of 40-45 is typical; a DSO of 60+ means collections are slipping and cash flow is paying the price.
Cut DSO by invoicing faster, sending reminders on schedule, offering easy payment links, and reviewing aging weekly. Every day shaved off DSO puts cash back in your account — a 5-day improvement on US$100,000 of AR is roughly US$15,000 of cash flow.
DSO is the average number of days customers take to pay. Lower DSO means faster cash flow and less risk of bad debt.
DSO = (Average Accounts Receivable ÷ Total Credit Sales) × Number of Days in the period.
Roughly your payment terms plus 10-15 days of delay. A DSO far above terms means collections need work.
Invoice immediately, automate reminders, send payment links, and review aging weekly.
Yes. Retten Work computes DSO from your invoices and payments and shows the trend.
