Days Sales Outstanding DSO

The average number of days a company waits to collect cash after making a credit sale.

Part of the Profitability & Quality course · Lesson 17 of 19

Formula

DSO = (Average accounts receivable / Revenue) x 365

What it is

Days sales outstanding (DSO) measures how long, on average, it takes a company to collect payment after a sale on credit. It is average accounts receivable divided by revenue, times the number of days in the period. It is the receivables-collection part of the cash conversion cycle.

Why it matters

A low DSO means cash comes in quickly, supporting liquidity and reducing the need for outside financing. A rising DSO can signal that customers are struggling to pay, that the company is loosening credit terms to chase sales, or even that revenue is being booked aggressively. Tracking the trend is more useful than a single reading.

How it's calculated

Divide average accounts receivable by total credit revenue and multiply by the number of days in the period (commonly 365 for a year).

How Quintarthai uses it

Accounts receivable and revenue needed for DSO are on the Financials tab of a company deep-analysis page.

Cross-border note. DSO is measured in days, so it compares cleanly across US and Canadian firms without currency conversion; just compare within the same industry, since payment norms differ by sector.

FAQ

What is a good DSO?

It depends on the industry and the company's credit terms. A firm offering net-30 terms would expect a DSO near 30. The most useful check is whether DSO is stable, rising, or falling over time versus peers.

Why might a rising DSO be a warning sign?

It can mean customers are paying more slowly, that credit terms were loosened to boost sales, or that revenue was recognized before cash will realistically be collected. Each warrants a closer look.

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