1. What is Days Sales Outstanding (DSO)?

Definition: DSO measures the average number of days it takes a company to collect payment after a sale has been made.

Purpose: It helps businesses evaluate their accounts receivable efficiency and cash flow management.

2. How Does the Calculator Work?

The calculator uses the formula:

Where:

• DSO — Days Sales Outstanding (days)
• Accounts Receivable — Total outstanding receivables ($)
• Net Credit Sales — Total credit sales minus returns ($)
• Number of Days — Time period (typically 365 for annual)

Explanation: The ratio shows what portion of credit sales remains uncollected, converted to days.

3. Importance of DSO Calculation

Details: A lower DSO indicates faster collection, better cash flow. Industry benchmarks vary, but generally under 45 days is good.

4. Using the Calculator

Tips: Enter accounts receivable amount, net credit sales, and time period (default 365 days). Net credit sales must be > 0.

5. Frequently Asked Questions (FAQ)

Q1: What's a good DSO value?
A: Varies by industry, but generally under 45 days is good. Compare with industry averages.

Q2: Should I use annual or quarterly data?
A: For annual DSO use 365 days, for quarterly use 90 or 91 days. Match the period to your sales data.

Q3: What if my company has seasonal sales?
A: Consider calculating DSO for each season separately for more accurate analysis.

Q4: How can I improve my DSO?
A: Implement better credit policies, offer early payment discounts, or improve collection processes.

Q5: Does this include cash sales?
A: No, only credit sales should be included in the calculation.