What is the DSO formula?

DSO = accounts receivable ÷ credit sales × number of days in the period.

One close to your payment terms. Many businesses aim for under 45 days, but it depends on industry norms.

Should I use ending or average receivables?

Either, as long as you are consistent. Average receivables smooth seasonal swings.

How can a business reduce DSO?

Invoice promptly, offer early-payment discounts, tighten credit checks and follow up overdue accounts quickly.

Days Sales Outstanding (DSO) Formula

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Days Sales Outstanding (DSO) Calculator

Days sales outstanding is the average number of days a business waits to be paid after making a credit sale. It divides accounts receivable by the credit sales for a period and multiplies by the number of days in that period. Finance teams track it monthly because it turns the receivables balance into something everyone understands: how many days of sales are still unpaid.

Formula

DSO = Accounts receivableCredit sales × Days in period

Where

Accounts receivable: receivables at the end of the period (or the average)
Credit sales: credit sales for the same period
Days in period: 365 for a year, 90 for a quarter, 30 for a month

Calculator

Accounts receivable

Credit sales for the period

Days in the period

Result and step-by-step solution

Days sales outstanding

30.66 days

It takes about 30.7 days to collect cash after a credit sale.

Share of the period’s sales still unpaid
42,000.00500,000.00 = 0.084
Multiply by the days
0.084 × 365 = 30.66 days

How to use the formula

Match the period: with a year of sales use 365 days, with a quarter 90 days, with a month about 30. Using quarterly sales with 365 days would overstate DSO fourfold. Ending receivables give a current snapshot; average receivables smooth out seasonal spikes.

With receivables of 42,000 and annual credit sales of 500,000, DSO is 30.66 days. Compare it with your standard payment terms: a DSO well above the terms means customers are paying late or some invoices are disputed. Reducing DSO releases cash without any new sales, which is why it is a key part of the cash conversion cycle. The receivables turnover ratio is the same information expressed as a count of collections per year.

Frequently asked questions

What is the DSO formula?: DSO = accounts receivable ÷ credit sales × number of days in the period.
What is a good DSO?: One close to your payment terms. Many businesses aim for under 45 days, but it depends on industry norms.
Should I use ending or average receivables?: Either, as long as you are consistent. Average receivables smooth seasonal swings.
How can a business reduce DSO?: Invoice promptly, offer early-payment discounts, tighten credit checks and follow up overdue accounts quickly.

Last reviewed: September 26, 2026. Calculations run in your browser and were checked against numpy-financial, SciPy and published spreadsheet examples.