Free Tool
DSO Calculator
Calculate your Days Sales Outstanding to understand how quickly your business collects payments after a sale is made.
What is Days Sales Outstanding (DSO)?
Days Sales Outstanding (DSO) is a financial metric that measures the average number of days it takes a company to collect payment after a sale has been made. It's one of the most important metrics for understanding your accounts receivable efficiency and overall cash flow health.
A lower DSO means your business is collecting payments faster, which improves cash flow and reduces the risk of bad debt. A higher DSO indicates that receivables are taking longer to collect, which can strain operations and limit growth.
How to Calculate DSO
The DSO formula is straightforward:
DSO = (Accounts Receivable / Total Credit Sales) × Number of Days
For example, if your total accounts receivable is $150,000 and your total credit sales over the past 90 days are $500,000, then your DSO = ($150,000 / $500,000) × 90 = 27 days.
The time period you choose matters. A 90-day window is most common because it smooths out monthly fluctuations while remaining current enough to be actionable.
What is a Good DSO?
- Under 30 days — Excellent. Payments are being collected quickly and cash flow is strong.
- 30–45 days — Good. Healthy collection pace with some room for improvement.
- 45–60 days — Needs attention. Delayed payments may be impacting cash flow.
- 60–90 days — Poor. Collections are slow and cash flow is at risk.
- Over 90 days — Critical. Significant cash flow risk that requires immediate action.
Keep in mind that DSO benchmarks vary by industry. Staffing companies, construction firms, and B2B services often have longer payment cycles than retail or SaaS businesses.
How to Improve Your DSO
Reducing your DSO means getting paid faster. Here are proven strategies:
- Automate invoice delivery — Send invoices immediately when work is completed, not days later.
- Offer online payment options — Make it easy for customers to pay directly from the invoice.
- Send automated reminders — Follow up on aging invoices before they become overdue.
- Use statement of aging emails — Give customers a clear view of all outstanding balances with payment links.
- Set clear payment terms — Establish and enforce consistent Net 15, Net 30, or Net 45 terms.
- Track invoice engagement — Know when invoices are viewed so you can time follow-ups effectively.
See how Stitch Workflow automates collections and reduces DSO →