Key Takeaways
- DSO measures how quickly your business collects payment after a sale
- Lower DSO means better cash flow and more efficient collections
- Industry average DSO ranges from 30-45 days
- DSO higher than payment terms indicates collection problems
- Track DSO monthly to identify trends and issues early
About the Days Sales Outstanding Calculator
The Days Sales Outstanding (DSO) Calculator is a comprehensive online tool designed to help you calculate the average collection period for accounts receivable. DSO is a critical financial metric that measures how long it takes, on average, for a company to collect payment after a sale has been made.
Understanding the DSO Formula
DSO = (Accounts Receivable / Annual Revenue) x 365
This calculator uses industry-standard formulas and methodologies to ensure accurate results. The calculation takes into account your accounts receivable balance and annual revenue to provide you with reliable information for decision-making.
How to Use This Calculator
Enter Accounts Receivable
Input your total accounts receivable balance. This is the total amount owed to your business by customers at the end of the period.
Enter Annual Revenue
Input your total annual credit sales revenue. This should be the total sales made on credit terms, not cash sales.
Click Calculate
Press the Calculate button to see your DSO result along with daily revenue and a performance rating.
Analyze Results
Compare your DSO to industry benchmarks and your payment terms to assess your collection efficiency.
Key Features
- Free to use with no registration required
- Mobile-friendly responsive design
- Instant calculations with real-time results
- Accurate formulas based on industry standards
- Easy to embed on your website
- No downloads or installations needed
Why DSO Matters for Your Business
Days Sales Outstanding is a crucial metric for understanding your company's cash flow health. A lower DSO indicates that your business collects payments quickly, which improves cash flow and reduces the risk of bad debts. Conversely, a high DSO may signal collection problems that need attention.
DSO Benchmarks by Industry
- Retail: 5-15 days (mostly cash/card sales)
- Manufacturing: 40-60 days
- Wholesale: 30-45 days
- Services: 30-50 days
- Construction: 60-90 days
Frequently Asked Questions
A good DSO is typically equal to or less than your payment terms. If you offer Net 30 terms, a DSO under 30 days is excellent. Generally, DSO under 45 days is considered healthy for most industries.
To reduce DSO: send invoices promptly, offer early payment discounts, require deposits, perform credit checks on new customers, follow up on overdue accounts quickly, and consider automated payment reminders.
Calculate DSO monthly to track trends over time. This allows you to identify seasonal patterns and catch collection problems early before they significantly impact cash flow.
DSO can increase due to: poor invoicing practices, customers facing financial difficulties, disputes over invoices, inadequate follow-up on overdue accounts, or extending credit to high-risk customers.
Yes! Click the "Copy Widget Code" button above to get the embed code for your website. The calculator is free to embed and use.
Additional Resources
For more finance calculators and tools, explore our complete collection at Calculator Cloud. We offer hundreds of free calculators across finance, health, math, science, and more.