Days Sales Outstanding
Also called: DSO
What is Days Sales Outstanding?
Days sales outstanding measures how long, on average, customers take to pay after being invoiced. It converts the receivables balance into a number of days, which is far easier to act on than a rupee total.
Why Days Sales Outstanding matters
DSO is the clearest early warning of a cash squeeze. It rises before the bank balance falls, so watching it gives you weeks of notice.
Days Sales Outstanding formula
DSO = Accounts receivable ÷ Credit sales × Days in the period
Compare against your standard credit period to see the true slippage.
How Days Sales Outstanding works in practice
Track it monthly against your stated terms. A DSO well above the terms you agreed means collections, not credit policy, is where the problem sits.
Worked example
₹12,00,000 of receivables on ₹36,00,000 of quarterly credit sales is a DSO of about 30 days.
Frequently asked questions
Close to your stated payment terms. Terms of 30 days with a DSO of 55 means the terms are not being enforced.