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Measuring Days Sales Outstanding

Using DSO to Improve Cash Flow Management

Days Sales Outstanding (DSO) is a measure of how efficiently and quickly a company converts credit sales into cash and how much of its credit sales are tied up unproductively as accounts receivable. The lower the number, the more efficient the company is and the less of its cash remains tied up as accounts receivable. It is a simple calculation:

days sales outstanding

For example, if a company has an average accounts receivable daily balance of $640,000 over 30 days and total credit sales of $742,000 for the same period, its DSO is 25.9 days.
DSO is a valuable indicator as it gives an indication of the efficiency of a company’s accounts receivable management as well as a tool to track changes in the quality of a company’s credit sales. Sales revenue earned but tied up in receivables cannot be used to fund operations, grow the business through investment, or be applied to retire costly debt.
What constitutes a good or bad level of DSO may be determined by your experience, but generally a DSO more than 30% greater than standard payment terms deserves collection action.

Days Sales Outstanding Calculator

An easy to use tool to help you calculate your business's DSO

Item Please Complete
Amount of Accounts Receivables ( Beginning of Period)
Amount Accounts Receivables (End of Period)
Sales (Net) This Period
Days (number) in the Period
Input only numbers without commas.

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