Accounts Receivable Days (DSO) Calculator
Calculate Days Sales Outstanding (DSO) to measure how quickly your business collects payment after a sale. Lower DSO means faster cash collection and better working capital efficiency.
📊 Finance💼 DSO = (AR / Revenue) * Days in Period
Accounts receivable balance ($)
Revenue in period ($)
Days in period (30, 90, or 365)
Please enter valid values.
Formula & Reference
| Variable | Formula | Units |
|---|---|---|
| Accounts Receivable Days (DSO) Calculator | DSO = (AR / Revenue) * Days in Period | days |
Step-by-Step Examples
Example 1
Standard B2B
$150k AR, $500k Q3 revenue, 90-day period.
- DSO = ($150k/$500k)*90 = 27 days
- Excellent! Collection in under 30 days
✓ 27 days DSO - excellent
Example 2
Slow Collections
$400k AR, $600k quarterly revenue, 90 days.
- DSO = ($400k/$600k)*90 = 60 days
- Average - invoices taking 2 months to collect
- Target: negotiate shorter payment terms
✓ 60 days DSO - needs improvement
Example 3
Impact of Improvement
$300k AR, $1M quarterly revenue, reducing DSO from 27 to 20 days.
- Current DSO: 27 days | Target: 20 days
- Cash freed: ($300k - $222k) = $78k
- $78k of working capital recovered from faster collection
✓ $78k freed by reducing DSO 7 days
Real-World Applications
Credit Management
Track DSO to identify collection issues before they become cash flow problems.
Cash Flow
Lower DSO directly improves cash position without external financing.
Financial KPIs
DSO is a standard metric in financial dashboards and investor reports.
M&A Due Diligence
High DSO or worsening trend flags collection risk in target companies.
Common Mistakes to Avoid
⚠️
Not segmenting DSO by customer size
Large customers often negotiate 60-90 day terms while SMBs pay in 15-30 days. Blended DSO hides customer concentration risk in collections.
⚠️
Accepting DSO creep without action
Rising DSO is an early warning sign of customer financial stress. Address collection issues immediately rather than accepting slow-paying as normal.
⚠️
Only calculating DSO on total AR without aging breakdown
An AR aging report showing 30%+ in 90+ days is more alarming than the blended DSO suggests. Review aging report alongside DSO.
Frequently Asked Questions
What is a good DSO for B2B? ▾
Under 30 days: excellent. 30-45 days: good. 45-60 days: average. Over 60 days: concerning - review your credit and collection process.
How does DSO affect cash flow? ▾
Every day of DSO represents cash tied up in receivables. On $1M/month revenue, reducing DSO from 45 to 30 days frees $500k in immediate working capital.
How do I reduce DSO? ▾
Send invoices immediately after delivery, offer early payment discounts (2/10 net 30), automate payment reminders, require credit cards for smaller clients, and enforce payment terms consistently.
What payment terms should I offer? ▾
Net 30 is standard for most B2B. Net 15 for smaller transactions. Net 60-90 is common for enterprise but negotiable. Always include late payment terms (1.5%/month) in contracts.
What is the difference between DSO and AR days? ▾
They are the same metric with different names. Days Sales Outstanding (DSO) and Average Collection Period both measure average days to collect payment after invoicing.