Cash & working capital
DSO (Days Sales Outstanding)
Formula reviewed by Tahir Asif, CMA
The average number of days it takes to collect payment after a sale on credit.
DSO measures how long, on average, receivables sit uncollected. A DSO of 45 means it takes roughly 45 days from invoicing to actually receiving payment, on average, across the period measured.
DSO is most meaningful compared against the business's own stated payment terms — a DSO of 60 against 30-day terms signals a real collections problem, while the same DSO against 60-day terms is right on schedule.
DSO
Accounts receivable ÷ (Total credit sales ÷ Days in period)
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