DSO Calculator
Calculate your Days Sales Outstanding to understand how efficiently you're collecting payments from customers.
DSO Calculator
Calculate your Days Sales Outstanding
Total amount currently owed to you by customers
Total invoiced sales during the time period (exclude cash sales)
What is Days Sales Outstanding (DSO)?
Days Sales Outstanding (DSO) is a key financial metric that measures the average number of days it takes your business to collect payment after making a sale. It's one of the most important indicators of your cash flow health and collection efficiency.
The DSO Formula
Why DSO Matters for Your Business
- Cash flow visibility: High DSO means cash is tied up in unpaid invoices rather than in your bank account
- Collection efficiency: DSO reveals how well your payment terms and collection processes are working
- Customer credit risk: Rising DSO may indicate customers are struggling to pay
- Business planning: Accurate DSO helps you predict when cash will arrive
What is a Good DSO?
A "good" DSO depends on your industry and payment terms, but here are general benchmarks:
| DSO Range | Assessment | What It Means |
|---|---|---|
| Under 30 days | Excellent | Very efficient collection, strong cash flow |
| 30-45 days | Good | Healthy range for most businesses |
| 45-60 days | Average | Room for improvement in collection |
| Over 60 days | Needs Attention | Potential cash flow issues, review collection process |
How to Reduce Your DSO
- Invoice promptly: Send invoices immediately after completing work, not days later
- Clear payment terms: State terms clearly on every invoice (e.g., "Payment due within 14 days")
- Automated reminders: Send payment reminders before and after due dates
- Easy payment options: Offer multiple payment methods (bank transfer, card, etc.)
- Credit checks: Assess customer creditworthiness before extending terms
- Deposits: Request deposits for large projects to reduce risk
DSO Example Calculation
Let's say your freelance business has:
- Accounts Receivable: £15,000 (unpaid invoices)
- Annual Credit Sales: £120,000
- Period: 365 days
This means it takes an average of 45.6 days to collect payment after invoicing—slightly above the Net 30 terms you might be offering.
Reduce Your DSO with Automated Reminders
Experi sends automatic payment reminders to customers when invoices are approaching or past due. Reduce your DSO without awkward follow-up calls.
Frequently Asked Questions
What is Days Sales Outstanding (DSO)?
Days Sales Outstanding (DSO) is a financial metric that measures the average number of days it takes a company to collect payment after a sale has been made. Lower DSO means faster collection and better cash flow.
How do you calculate DSO?
DSO = (Accounts Receivable / Total Credit Sales) × Number of Days in the period. For example, with £15,000 in receivables and £120,000 in annual credit sales: DSO = (15,000 / 120,000) × 365 = 45.6 days.
What is a good DSO?
A "good" DSO depends on your industry and payment terms. Generally: under 30 days is excellent, 30-45 days is good, 45-60 days is average, and over 60 days needs attention. Your DSO should ideally be close to your standard payment terms.
How can I improve my DSO?
Invoice promptly, set clear payment terms, send automated payment reminders, offer multiple payment options, and consider requiring deposits for large projects. Regular follow-up on overdue invoices is also essential.