Days sales outstanding
How long, on average, customers take to pay you after you invoice them.
01 What it is
Why anyone looks at this number
How long, on average, customers take to pay you after you invoice them.
Every day of DSO is a day of your money sitting in someone else's bank account. It is usually the largest and the most fixable piece of working capital.
02 The formula
How it is worked out
Days sales outstanding = (accounts_receivable ÷ net_revenue) × days_in_period grain : month × customer × entity unit : days source : Accounts receivable subledger
Use the same revenue basis in the denominator as the receivables in the numerator — including VAT on one side and not the other is the classic reason two teams report different DSO.
03 Worked example
The same number, with real inputs
| Receivables | €8.36m |
| Revenue for the year | €50.0m |
| Days | 365 |
| Calculation | (8.36 ÷ 50.0) × 365 |
| Result | 61 days |
At €137k of revenue a day, pulling DSO back to 52 days would release about €1.23m of cash — without selling anything extra.
04 What moves it
Four things that actually change this number
Payment terms sold
Sales agrees 90 days to win a deal and finance carries it.
Invoice accuracy
A wrong invoice is not disputed on day 1, it is disputed on day 45.
Collections effort
Who chases, how early, and whether anyone is measured on it.
Customer mix
Public sector and large retailers pay slowly by policy, not by accident.
05 Where the number lives
The system, the record and the fields
| System of record | Key record | Fields you need |
|---|---|---|
| Accounts receivable subledger | Open item on the customer account, joined to Invoice | invoice_date, due_date, clearing_date, amount, payment_terms |
Use the same revenue basis in the denominator as the receivables in the numerator — including VAT on one side and not the other is the classic reason two teams report different DSO.
06 How it goes wrong
Three ways this metric misleads people
Averaging away the problem
One large slow payer hides behind a healthy average.
Fix: Report the ageing profile and the top ten overdue balances, not just the mean.Counting disputes as late payment
Invoices in dispute are a service problem, not a collections problem, and need a different owner.
Fix: Split the ageing into disputed and simply unpaid.Ignoring seasonality
A quarter that ends after a big shipping month always shows high DSO.
Fix: Use a countback method, or compare to the same period last year.08 Questions
Frequently asked
What is a good DSO?
Compare it to your own payment terms first. If you sell on 30 days and collect in 61, the gap is the problem — not the absolute number, which varies enormously by industry and customer type.
How do I reduce DSO quickly?
Invoice accuracy and early contact do more than escalation. Most late payment traces back to an invoice the customer could not process, or to nobody asking until it was already overdue.
One definition, everywhere it is used
SCIKIQ stores this metric once and serves it to every dashboard, board pack and agent that asks.