What is days sales outstanding (DSO)?
Days sales outstanding, or DSO, is the average number of days a company takes to collect payment after a sale on credit. It is usually calculated as trade receivables divided by credit sales for a period, multiplied by the number of days in the period, and is the headline measure for accounts receivable and collections teams.
Also calledDSOdebtor daysaverage collection period
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- Formula
- Receivables ÷ credit sales × days
- Compare with
- Payment terms
- Category
- AP, AR and payments
How DSO is calculated and used
With receivables of 1.5 million at month-end and credit sales of 3 million over the last 90 days, DSO is 1.5 ÷ 3 × 90, or 45 days. Because the result moves with sales, a seasonal spike can change DSO without any change in how customers pay; the count-back method, which works backwards through monthly sales until the receivables balance is used up, is less affected. DSO is compared with the company's payment terms: on 30-day terms, a DSO of 45 means customers pay on average about two weeks late. Best possible DSO, which counts only current invoices, separates the effect of terms from late payment. DSO is one leg of the cash conversion cycle. Receivables platforms such as Stuut, Kolleno, Monk and Tabs report it and target the overdue part.
Common questions
What is a good DSO?+
One close to the company's payment terms. A business on 30-day terms with a DSO of 32 collects almost on time; the same terms with a DSO of 60 mean customers pay a month late. Norms also differ widely by industry.
How can a company reduce DSO?+
Invoice promptly and accurately, send reminders before the due date, offer easy ways to pay, resolve disputes quickly, set credit limits, and chase overdue accounts by priority. Shorter terms reduce it too, where customers accept them.
What is the difference between DSO and debtor days?+
None in practice: debtor days is the common UK name for the same measure. Both express receivables as days of credit sales.
Software used to reduce DSO
StuutAI agents running collections, cash application and disputes end to end.Profile →
KollenoAI-prioritised collections, payments and reconciliation.Profile →
MonkAI-native receivables with automated collections and cash application.Profile →
TabsContract terms driving billing, collections and revenue recognition.Profile →
FazeshiftAI agents automating accounts receivable for enterprise finance teams.Profile →
CentimeAP, AR, forecasting and banking in one cash flow view.Profile →Part of Accountio’s accounting technology coverage · Glossary
