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.
Formula
DSO = (Outstanding accounts receivable balance / Sales) × number of days
−10%
Lower your DSO with CreditDevice
< 45
DSO score considered excellent
Lower your DSO
5 proven strategies to lower your DSO
Direct Invoicing
Send an invoice immediately after delivery
01
Automatic payment reminders
Remind customers to pay on time
02
Discount for prompt payment
Encourage early payments
03
Accounts Receivable Analysis
Identify and focus on slow payers
04
Optimize credit policy
Check the creditworthiness of new customers
05
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
Example calculation:
You have €25,000 in outstanding invoices and your annual sales are €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:
Excellent accounts receivable management
Acceptable, but stay alert
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: Use 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 act faster and prevent outstanding invoices from lingering. This allows you to structurally lower your DSO, save time, and boost your cashflow.
The debtor term is the agreed number of days, DSO is the actual average payment term.
Direct Cashflow
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.
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