DSO
Calculate DSO
DSO, or Days Sales Outstanding, is the outcome of your outstanding accounts receivable balance divided by your sales, multiplied by “x” number of days. It indicates the average time it takes for your outstanding accounts receivable balance to be paid.
DSO Calculator
Calculate your Days Sales Outstanding (average payment term)
Total value of unpaid invoices
Total revenue for the selected period
Current DSO
This means your customers take an average of 7.5 days to pay their invoices.
With CreditDevice
With CreditDevice, you can reduce your DSO by an average of 10%.
Formula:
DSO = (Outstanding Receivables / Revenue) × number of days
5 proven strategies to lower your DSO
Direct Invoicing
Send an invoice immediately after delivery
Automatic payment reminders
Remind customers on time
Discount for prompt payment
Encourage early payments
Accounts Receivable Analysis
Identify and focus on slow payers
Optimize credit policy
Check creditworthiness of new customers
Improve your accounts receivable management
Calculating DSO is a powerful tool for any company looking to improve its cash flow and financial stability. With the right strategies, you will lower your DSO, improve your accounts receivable management and strengthen the financial health of your organization.
DSO explained
Frequently asked questions about DSO and accounts receivable management
DSO (Days Sales Outstanding) is a financial KPI that shows the average number of days it takes a company to get its invoices paid. DSO thus provides insight into how quickly customers pay. It is an essential metric for companies looking to optimize their accounts receivable management and cash flow.
A good DSO score is crucial to the health of your business. If you know how long you have to wait for your money, you can:
- Identify bottlenecks in your accounts receivable faster
- Improve the liquidity of your business
- Optimize your payment terms and customer relationships
- Reduce risks of default or cash flow problems
DSO formula:
DSO = (Average accounts receivable amount ÷ Turnover) × Number of days in the period
Sample calculation:
You have €25,000 in outstanding invoices and your turnover in a year is €100,000:
DSO = (€25,000 ÷ €100,000) × 365 = 91.25 days
So on average, your customers pay after 91 days. That’s on the long side and may indicate room for improvement in your accounts receivable management.
Monthly or quarterly is ideal for monitoring trends in payment behavior.
A good DSO depends on your industry, but this is a handy guideline:
| DSO score | Meaning |
|---|---|
| Lower than 45 | Excellent accounts receivable management |
| Between 45 and 60 | Acceptable, but note |
| Higher than 60 | Risk of slow payments |
- Send invoices immediately after delivery or completion
- Use automatic payment reminders
- Apply short payment terms (e.g., 14 or 30 days)
- Encourage digital payments via iDEAL, QR or payment link
- Stay in touch with customers about outstanding invoices
Bonus tip: Make use of Credit Management Software from CreditDevice. This software helps you automate the entire accounts receivable process, from invoicing to follow-up. Thanks to smart workflows, real-time insights and automatic reminders, you can take action faster and prevent outstanding invoices from remaining outstanding. This way, you structurally reduce your DSO, save time and improve your cash flow.
The debtor term is the agreed number of days, DSO is the actual average payment term.
Our partners in success
Meet some of the many companies that have optimized their credit management with CreditDevice.
