Free tool · Getting paid
Days sales outstanding (DSO) calculator
How many days, on average, do your customers take to pay? Enter receivables and credit sales for your DSO, how it compares with your terms, and what collecting faster is worth. Runs in your browser; nothing is saved.
From your books
Sales you invoiced, not cash sales. If almost everything is invoiced, total sales is fine.
Receivables to use
30 for net 30. Shows how far past terms customers pay.
Days sales outstanding
Receivables used
$62,000.00
Credit sales per day
Credit sales ÷ days in the period
$1,232.88
DSO
Receivables ÷ credit sales per day
50.3 days
Beyond your terms
20.3 days
Cash freed by cutting DSO 10 days
Money that comes in sooner, once, not every year
$12,328.77
DSO is an average: a few very late invoices can hide behind many quick ones, so read it with an accounts receivable aging report. Works in any currency.
How DSO is calculated
- Credit sales per day = credit sales for the period ÷ days in the period.
- DSO = accounts receivable ÷ credit sales per day. Use receivables at the end of the period, or the average of the start and end.
- Days beyond terms = DSO − your standard payment terms.
- Cash freed by cutting DSO by a number of days = credit sales per day × those days.
Worked example
An electrical contractor invoiced $450,000 last year on net 30 terms, and customers owed $62,000 at year-end. Credit sales per day are $450,000 ÷ 365 = $1,232.88. DSO is $62,000 ÷ $1,232.88 = 50.3 days, about 20 days beyond terms. Getting DSO down to 40 days would bring in roughly $12,329 sooner.
How to lower DSO
- Invoice the day the work is done, not at the end of the month. Every day of delay adds a day to DSO.
- Make the due date clear: the date itself, not just "net 30". The invoice due date calculator works it out, including early-payment discounts.
- Take deposits on large jobs; see customer deposits and retainers.
- Remind before and after the due date, and send a statement each month. Our guide on how to collect overdue invoices has a schedule.
- Charge for late payment where your terms allow; the late payment interest calculator works out the amount.
- Accept the payment methods customers use, so paying you is never the hard part.
Questions
What is the DSO formula?
Days sales outstanding = accounts receivable ÷ credit sales × days in the period. With $62,000 owed by customers at year-end and $450,000 of credit sales in the year: $62,000 ÷ $450,000 × 365 = 50.3 days. On average, customers take about 50 days to pay.
What is a good DSO?
Compare it with your payment terms. If you invoice on net 30, a DSO of 30 to 35 days means customers pay close to on time; 50 means they pay about three weeks late on average. Industries with longer standard terms, such as construction with retainage, run higher.
Should I use ending or average receivables?
Ending receivables is the usual quick version and reflects where you are today. Average receivables ((start + end) ÷ 2) smooths out a big invoice issued on the last day. Pick one and use it every time so the trend is meaningful.
Why only credit sales?
Cash and card sales paid on the spot never become receivables, so including them makes DSO look better than it is. If nearly all your sales are invoiced, total sales is close enough.
How much cash does a lower DSO free up?
Each day of DSO is worth one day of credit sales. At $450,000 a year, that is about $1,233 a day, so cutting DSO by 10 days brings in about $12,329 sooner. It is a one-time gain in cash, not extra income each year, but it can replace a loan.
Why is DSO not enough on its own?
It is an average. One large customer 120 days late can hide behind many who pay in two weeks. Read DSO alongside an accounts receivable aging report, which lists every customer by how overdue they are.
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Related
- All free tools
- What is accounts receivable?
- Aging report explained
- Cash runway calculator
- Working capital calculator
- How to write off a bad debt
- Try AcboBooks free for 15 days
General information, not financial advice.
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