Financial metrics glossary
Days sales outstanding (DSO): definition, formula and example
Days sales outstanding (DSO) is the average number of days a company takes to collect payment after a sale made on credit. It is accounts receivable divided by credit sales for a period, multiplied by the number of days in that period.
Updated
Formula
- DSO = Accounts receivable ÷ Credit sales in the period × Days in the period
Worked example
SampleSAMPLE · Northbridge Analytics, September 2026
Northbridge Analytics, the fictional software company in the Financial Analyst's public sample, at the end of September 2026. The month's revenue is annualised and the period is a year:
| Line | Amount |
|---|---|
| Accounts receivable at month end | $194,800 |
| Revenue, September 2026 | $163,156 |
| Annualised revenue (× 12) | $1,957,866 |
| Days in the period | 365 |
- DSO = $194,800 ÷ $1,957,866 × 365 = 36.3 days
Days sales outstanding: 36 days
The sample report prints DSO in whole days, next to days payable outstanding.
How to read it
- Compare DSO with your payment terms. With 30-day terms, a DSO well above 30 means customers are paying late on average.
- DSO is an average. One large overdue invoice can lift it while most customers pay on time, so read it with the receivables ageing: how much is current and how much is 31–60, 61–90 and over 90 days past due.
- Keep the window the same each time, with receivables taken at its end. Strong sales at the end of the window raise receivables, and DSO with them, without any change in how fast customers pay.
- Use credit sales when cash sales are a meaningful share: cash sales never become receivables, and including them makes DSO look shorter than it is.
- Read DSO next to days payable outstanding (DPO). The gap between when you collect from customers and when you pay suppliers is working capital the business has to finance.
How small US public companies compare (FY2025 10-Ks)
- Median
- 42.7 days
- Middle half
- 21.3 days to 69.4 days
- Companies
- 591
All industries, from Ataski's study of the fiscal 2025 annual reports (Form 10-K) that non-accelerated filers with revenue of $1 million to $250 million filed with the SEC: half the companies are above the median and half below, and the middle half fall within the range shown. These are small public companies, not private businesses, so read the figures as a reference point rather than a target.
Days sales outstanding (DSO) by industry, with the method →
Source: Ataski analysis of SEC Financial Statement Data Sets (FY2025 10-K filings).
Where it shows up in the monthly management report
The report's “Cash and working capital” page shows receivables and payables with days sales outstanding and days payable outstanding, read from the receivables and payables in your accounting system.
- Open the sample workspace — a fictional company's books, worked by the Financial Analyst, with its monthly report. No signup.
- The Financial Analyst — what it reads from your accounting system, what the report contains and what it costs.
- The AR Cash Collector — follows up on overdue invoices, the receivables that age and lift DSO.
Related metrics
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Accounts receivable aging
Unpaid customer invoices grouped by how many days they are past due.
-
Days payable outstanding (DPO)
The average number of days a company takes to pay its suppliers.
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Cash conversion cycle (CCC)
Days from paying suppliers to collecting from customers: DSO + DIO − DPO.
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Working capital
Current assets minus current liabilities, in dollars.
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Current ratio
Current assets divided by current liabilities, as a ratio.
Frequently asked questions
What is a good DSO?
Median 42.7 days (middle half 21.3–69.4 days), 591 companies, FY2025 10-Ks: the days sales outstanding (DSO) of small US public companies, with revenue of $1 million to $250 million and outside finance, insurance and real estate. Compare it with your payment terms first: with 30-day terms, a DSO well above 30 means customers pay late on average. Then compare it with your own trend.
Source: Ataski analysis of SEC Financial Statement Data Sets (FY2025 10-K filings)
What does a high DSO mean?
Customers are taking longer to pay, so more of the company's revenue sits in receivables instead of the bank. Rising DSO can come from late payers, longer terms, invoice errors that hold up payment, or a large share of sales at the end of the period.
What is the difference between DSO and DPO?
DSO measures how long you wait to be paid by customers; DPO measures how long you take to pay suppliers. Together with days inventory outstanding they make up the cash conversion cycle: DSO plus days inventory outstanding minus DPO.
How do you lower DSO?
Invoice promptly and accurately, agree clear payment terms, follow up as soon as an invoice is overdue, and make paying easy.
Which period should DSO use?
Any period works if receivables are taken at its end and the day count matches its length — the month's days for a month, about 90 for a quarter, 365 for a year. Use the same window every time so readings are comparable.