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Collections

DSO (Days Sales Outstanding)

The average number of days it takes to collect payment after invoicing.

Days Sales Outstanding measures collection speed:

DSO = (accounts receivable ÷ revenue in the period) × days in the period

It is best read against your own net terms. A DSO of 45 on Net 30 means customers are running roughly two weeks late on average; a DSO of 45 on Net 60 means they are paying early.

DSO rising while revenue is flat is one of the earliest signals of trouble, either in your own invoicing accuracy or in your customers’ finances.

Related terms

  • Net terms How long a customer has to pay after an invoice is issued. Net 30 means thirty days.
  • Ageing (AR ageing) Outstanding receivables grouped by how overdue they are, usually in 30-day buckets.
  • Collections The process of recovering invoices that are past due, from reminders through to escalation and write-off.