Days Sales Outstanding
A measure of the average number of days a business takes to collect payment after a credit sale, often shortened to DSO.
What it measures
Days sales outstanding (DSO) is the average time between issuing an invoice and receiving payment. It is calculated as accounts receivable divided by credit sales, multiplied by the number of days in the period. A lower DSO means cash is collected faster, which strengthens working capital.
Using DSO
Rising DSO is an early warning that collections are slipping or that customers are stretching payment terms. Track it monthly and compare against your stated terms. You can calculate and chart DSO over time with the Merion business tools to spot the trend before it bites.
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