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Measure how long customers take to pay — and what that delay costs in cash.
DSO is the distance between the sale and the cash. It is the one working-capital number that customers control and you only influence — which is exactly why it needs measuring monthly rather than admiring annually. Every day of DSO above your terms is an interest-free loan you did not agree to make.
Your numbers
Exclude cash sales — they never enter receivables.
Days sales outstanding
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Average days between invoicing a customer and banking their payment.
Updates as you type · nothing leaves your browser
The formula
DSO = (Accounts receivable ÷ Revenue) × Days in period
Compare the answer against your stated payment terms — the gap is your collections problem.
What it means
Accounts Receivable — full definition
Read in the glossaryUse credit revenue only. Including cash sales inflates the denominator and understates the real collection period.
Match the receivables balance to the same period, ideally as an average of opening and closing rather than a single snapshot.
Compare the result to your standard terms. Terms of 30 days with a DSO of 42 means 12 days of unplanned financing.
DSO is an average, so a few very large late accounts can hide behind a mass of prompt small ones. Read it next to an aged receivables report, never instead of one.
A sharp fall in DSO right after a sales slump is arithmetic, not improvement — the denominator moved.
Worked example
Receivables of 480,000 against 3.6m of annual credit revenue gives daily sales of 9,863 and a DSO of 48.7 days. On 30-day terms, that is nearly 19 days of drift — about 185,000 of cash sitting in other people's bank accounts, financed by yours.
Terms plus five days is a realistic target for most B2B operations. The absolute number matters far less than the gap between DSO and your own stated terms.
No — they are precisely what you are measuring. Excluding them produces a number that says nothing about collections.
Invoice on the day of delivery, chase before the due date rather than after, and put credit limits behind order release. Most DSO drift starts with late invoicing, not with unwilling customers.
This calculator works on one set of numbers. AWRA OpsHub keeps dso calculator results current across every item, supplier and location — automatically.
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