What is days sales outstanding (DSO)?
Days sales outstanding is the average number of days it takes a company to collect payment after a sale is invoiced. A DSO of 60 means the typical invoice is paid about two months after it goes out. It is one of the three parts of the cash conversion cycle. A rising DSO means cash is arriving more slowly than revenue.
Why it matters to a revenue leader
DSO is partly a sales outcome. The customers your team targets, the payment terms they agree to and how clean the paperwork is all affect how fast cash comes in. Disputed invoices often trace back to unclear scope or missing change order approvals. In commercial services, general contractors and large property owners often pay more slowly than small building owners, so a shift in customer mix can move DSO.
How to calculate it
DSO = (accounts receivable divided by credit sales for the period) times the number of days in the period. A common mistake is comparing DSO across periods of different length, or across seasons, without adjusting.
Example
Fictitious numbersA fire protection company has $4.5 million of receivables at quarter end and $9 million of credit sales in the 90-day quarter. DSO is 45 days. If a new general contractor customer pushes receivables to $5.4 million on the same sales, DSO rises to 54 days.
"Which customers and terms are pushing our DSO up, and did sales agree to them?"
Sources
- Days Sales Outstanding (DSO) (Corporate Finance Institute) checked 9 Oct 2026