Days Sales Outstanding

The days sales outstanding — or DSO — equals 365 divided by accounts-receivable-turnover. A DSO of 45 means it takes an average of 45 days to collect payment from customers. Lower DSO signals faster collection and stronger cash flow.

Days Sales Outstanding — key facts

Days to collect from customers.


Formula	365 ÷ accounts receivable turnover
Unit	Days
Benchmark	Varies by payment terms and industry
Lower	Faster collection, stronger cash flow
Higher	Slower collection, cash tied up
Data required	Accounts receivable turnover

The intuition

A company collecting receivables 8 times per year has DSO of 365 ÷ 8 = 46 days. Customers take an average of 46 days to pay.

DSO reflects both payment terms and collection efficiency. A company with net-30 terms should have DSO around 30-35 (accounting for some slow payers).

How to calculate it

365 ÷ Accounts receivable turnover.

Example: A company with AR turnover of 9 has DSO of 365 ÷ 9 = 41 days.

When it works well

Monitoring collection trends. Rising DSO with stable revenue signals customers are paying slower.

Assessing working capital. High DSO means more cash is tied up in receivables.

Comparing payment terms. A company with DSO significantly above stated terms (net-30) has collection problems.