What is DSO?
The average number of days it takes to collect payment after a sale is made.
Think of it like this
Like measuring how many days until your paycheck arrives after you've worked - shorter is better.
Formula
DSO = (Accounts Receivable ÷ Revenue) × 365- Accounts Receivable: Money owed by customers
- Revenue: Annual sales
- 365: Days in a year
Why it matters
- Direct measure of collection speed
- Affects cash flow timing
- Lower DSO = faster cash conversion
- Rising DSO can signal problems
What's a good value?
< 30 days
Excellent
Very fast collection
30-45 days
Good
Normal payment terms
45-60 days
Average
Standard for B2B
> 60 days
Slow
Potential collection issues
Real-world example
If DSO increases from 35 to 50 days, investigate whether customers are paying slower.
Screen US stocks by DSO in the app, and see which companies pass right now.