Days Sales Outstanding Calculator
Measure how quickly your company collects receivables and analyze cash conversion efficiency
Calculate Days Sales Outstanding
Accounts Receivable
Accounts receivable at the start of the period
Accounts receivable at the end of the period
Average Receivables: $0
Sales Information
Total sales revenue for the accounting period
Usually 365 days for annual periods
Average Daily Sales: $0
DSO Analysis Results
Receivables Turnover
0.00x
Times per year
Collection Analysis
Complete the inputs to perform DSO analysis
Formula: DSO = (Average Accounts Receivable ÷ Total Sales) × Accounting Period
Alternative: DSO = Average Accounts Receivable ÷ Average Daily Sales = 0.0 days
Collection Insights
Very low DSO may indicate overly strict credit terms that could limit sales growth
Low receivables turnover suggests need for improved collection strategies
Example: Company Alpha DSO Analysis
Company Data
Beginning Receivables: $300,000
Ending Receivables: $250,000
Average Receivables: $275,000
Total Sales (2021): $5,000,000
Accounting Period: 365 days
Average Daily Sales: $13,699
DSO Calculation
Step 1: Average Receivables = ($300,000 + $250,000) ÷ 2 = $275,000
Step 2: DSO = ($275,000 ÷ $5,000,000) × 365 = 20.1 days
Result: Company Alpha collects receivables in about 20 days - Excellent performance
DSO Performance Benchmarks
Excellent
Fast collection
Within payment terms
Average
Standard performance
Industry typical
Poor
Collection issues
Cash flow risk
Industry DSO Standards
Retail: 15-30 days
Fast inventory turnover
Manufacturing: 30-60 days
Standard B2B terms
Construction: 60-90 days
Project-based payments
Professional Services: 45-75 days
Client billing cycles
DSO Improvement Strategies
Clear payment terms
Credit checks before sales
Regular follow-ups
Early payment discounts
Automated invoicing
Collection agencies for overdue
Understanding Days Sales Outstanding (DSO)
What is Days Sales Outstanding?
Days Sales Outstanding (DSO) measures the average number of days it takes a company to collect payment from customers after a sale has been made. It's a key metric for assessing the effectiveness of credit and collection policies.
Why is DSO Important?
- •Measures collection efficiency
- •Indicates cash flow health
- •Helps identify bad debt risks
- •Guides credit policy decisions
DSO Formula
DSO = (Average Receivables ÷ Total Sales) × Days
Standard calculation method
Alternative Formula
DSO = Average Receivables ÷ Average Daily Sales
Direct calculation method
Key Components: Beginning receivables, ending receivables, total sales, and accounting period
DSO Impact on Business
Low DSO Benefits
- • Improved cash flow
- • Reduced bad debt risk
- • Better working capital
- • Lower financing costs
High DSO Risks
- • Cash flow constraints
- • Increased bad debts
- • Higher financing needs
- • Operational challenges
Optimization Strategies
- • Streamline billing processes
- • Offer payment incentives
- • Implement credit controls
- • Regular customer follow-up