What is DSO?
Days sales outstanding (DSO) is the average number of days a company takes to collect payment after a sale. It is accounts receivable at the end of a period divided by the period's credit sales, usually revenue, multiplied by the days in it, so a lower DSO means cash arrives sooner for the same revenue.
How DSO is calculated
Divide receivables at the period's end by the period's revenue, and multiply by its days. Keep the 2 sides on one period: a month's revenue against 30 days, or a year's against 365.
DSO = Accounts receivable at period end ÷ Revenue for the period × Days in the period
A worked example
In the illustrative example workspace, Gloaming Fescue Inc ends June 2026 with $526,400 of receivables on $987,000 of recognised revenue.
| Operation | Line | Figure |
|---|---|---|
| Accounts receivable at 30 June | $526,400 | |
| ÷ | Revenue recognised in June | $987,000 |
| × | Days in June | 30 |
| = | DSO | 16.0 days |
Shown as 16 days, down from 32 in June 2025. At last year's pace the same revenue would have carried $526,400 more in receivables.
Work out your DSO
Enter your own period's figures and the tape works them out. It starts on June's, from the example above.
One day of DSO holds $32,900 of cash: one day's revenue, $987,000 ÷ 30.
See the Collections agent at workCommon mistakes
Mixing period lengths
A month-end balance against a year's revenue, or 30 days against a quarter's, gives a figure that means nothing. Match the days to the revenue's period.Reading one month as a trend
A large invoice raised on the last day lifts that month's DSO without anything collecting more slowly. Compare the same month across years, or a rolling average.Calling it the typical time to pay
DSO is a ratio of balances, not a median. Gloaming Fescue's median invoice was paid in 19 days, but its DSO is 16: the 2 are different measures.
How Verlix handles it
Once you turn it on, the Collections agent chases every overdue invoice from the morning after it falls due and hands a person only the cases that need a decision, which is what brings DSO down. The figure is read from the same receivables the invoices raised, so it ties to the ledger.
Accounts receivable automation and dunningRelated terms
Dunning
Chasing an overdue invoice in planned, escalating steps until it is paid.Deferred revenue
Billed or collected but not yet earned, a liability until the work is done.