Business glossary
Days sales outstanding (DSO)
A measure of the average number of days a business takes to collect receivables.
Example
With average receivables of $9,000 and credit sales of $27,000 over 90 days, DSO = $9,000 ÷ $27,000 × 90 = 30 days.
How it differs from related terms
DSO estimates collection time across a period; it is not a specific invoice's age. Use matching periods and a consistent receivables basis. A change in sales mix or seasonal billing can affect the measure without every customer paying more slowly.
Frequently asked questions
What is an example of days sales outstanding?
With average receivables of $9,000 and credit sales of $27,000 over 90 days, DSO = $9,000 ÷ $27,000 × 90 = 30 days.
How should days sales outstanding be interpreted?
DSO estimates collection time across a period; it is not a specific invoice's age. Use matching periods and a consistent receivables basis. A change in sales mix or seasonal billing can affect the measure without every customer paying more slowly.