Days sales outstanding (DSO)
Days sales outstanding (DSO) is the average number of days it takes your business to collect payment after a sale. A lower DSO means you get paid faster. You calculate it by dividing accounts receivable by total credit sales, then multiplying by the number of days in the period.
How to calculate DSO
The formula is: (Accounts receivable ÷ total credit sales) × number of days in the period. For example, if you are owed $30,000, had $180,000 in credit sales over 90 days, then DSO is (30,000 ÷ 180,000) × 90 = 15 days. Track it monthly, and watch the trend more than the absolute number.
What a good DSO looks like
A healthy DSO is usually close to your payment terms. If you invoice Net 30 but your DSO is 55, clients are paying roughly 25 days late on average, and consistent follow-up is the fix. Automating reminders is one of the most reliable ways to bring DSO down toward your terms.
Frequently asked questions
What is a good days sales outstanding?
A good DSO is close to your payment terms. If you invoice Net 30, a DSO in the low 30s is healthy; a DSO well above your terms means clients pay consistently late. The exact target varies by industry, so watch your own trend over time rather than comparing to a single benchmark.
How do I reduce days sales outstanding?
Invoice promptly and clearly, offer easy payment methods, and follow up on every invoice on a fixed schedule rather than sporadically. Consistent reminders before and after the due date are the single biggest lever, which is why automating them typically pulls DSO down toward your stated terms within a couple of cycles.
Stop chasing invoices by hand
Owendly forecasts, tracks, chases, collects, and recovers your invoices automatically, in your own voice.
Start free — 5 invoices