How this number is made
Days sales outstanding is receivables divided by daily revenue. A rising number means customers are paying slower, or you are booking revenue you will not collect. Use a period that matches the receivable.
- Revenue is the credit sales if cash sales never become receivables.
- Days in the period is 30, 90, or 365, matching the revenue figure.
Formula
DSO = receivables ÷ (revenue ÷ days).
Worked example
With the figures already in the form, days sales outstanding is 30.0.
Questions
What is a good DSO?
Lower than your payment terms, roughly. A DSO of 70 on net-30 invoices means you are not being paid on time.
Do cash sales belong?
They lower the average and hide a slow credit book. Exclude them if you can.