It watches the aging, not the calendar
An agent sitting on your invoice data knows the day something slips, per customer and per invoice, instead of it surfacing when somebody next runs a report.
Free tool
How long is your money sitting in someone else's account?
Work out your days sales outstanding, then see what the gap between that and where you want to be is actually costing you in cash.
Free, no signup. Your numbers stay in your browser.
Run the numbers
Work out your DSO
Three numbers off your own ledger. Nothing is sent anywhere.
1
Owed2
Invoiced3
Target4
ResultWhat are you owed right now?
Your accounts receivable balance: everything invoiced and not yet paid.
$320,000
$1,000$5,000,000
Understand the metric
How to calculate DSO: the formula, worked through
Days sales outstanding, or DSO, is the average number of days it takes to collect payment after a sale on credit. The DSO formula is your accounts receivable balance divided by your credit sales for a period, multiplied by the number of days in that period. It is the cleanest single read on whether your invoices are turning into cash at the speed your business assumes they are.
What the number is telling you
DSO is a speed measure, not a size measure. A high DSO does not mean you are owed a lot of money; it means the money you are owed is old relative to what you are selling. A business invoicing on 30 day terms and running a DSO of 58 is, on average, waiting almost a month past its own terms to get paid.
How to read the result
Compare it to your payment terms rather than to a benchmark. DSO of 45 on 30 day terms is a 15 day gap; the same 45 on 60 day terms means you are being paid early. Watch the direction more than the level: a DSO climbing quarter on quarter is a collections process falling behind its own growth.
Why a day matters
One day of DSO is worth one day of sales in cash. That is the whole reason the number gets attention in a board pack. Cutting DSO by ten days does not increase revenue by a penny, it just means ten days of sales are in your account instead of your customer's, which is usually cheaper than the equivalent borrowing.
Where it usually goes wrong
Rarely at the credit decision, almost always in the follow-up. Invoices slip a few days, nobody notices until the aging report is run, the chase is a manual job somebody fits around their real work, and the awkwardness of asking pushes it further down the list. The gap is an attention problem before it is a finance one.
How it is calculated
DSO = (Accounts receivable / Credit sales for the period) x Days in the period
- 1Take your accounts receivable balanceEverything you have invoiced and not yet been paid for, at the end of the period you are measuring.
- 2Take your credit sales for the same periodWhat you invoiced over that period. Exclude anything paid up front, since it never sat in receivables and will flatter the result.
- 3Divide receivables by credit salesThis gives the share of a period's sales still sitting unpaid.
- 4Multiply by the number of days in the periodNinety for a quarter, 365 for a year. The result is your DSO in days.
- 5Compare it to your payment termsThe gap between your DSO and the terms you actually invoice on is the part that is available to fix.
The build
What we would build against this
It chases in your voice, not a template blast
A first nudge reads differently from a fourth. The sequence adapts to the customer, the amount and how they have paid before, and it stops the moment payment lands.
It escalates instead of guessing
Disputed invoice, a promise to pay, a customer worth keeping sweet: those come to a person with the history attached. The agent handles the routine and knows what is not routine.
You keep it
It runs on your systems and your data, and your team operates it after we hand it over. Same as everything else we build.
Questions
DSO questions, answered
DSO equals your accounts receivable balance divided by your credit sales for a period, multiplied by the number of days in that period. For example, $320,000 owed against $600,000 invoiced over 90 days gives a DSO of 48 days.
The only meaningful comparison is to your own payment terms. A DSO close to your terms means the process is working; a DSO well above them means invoices are slipping and nobody is catching them early. Benchmarks across industries vary so widely that they mostly tell you what industry you are in.
Use the same formula with 30 or 31 days and that month's invoiced total. Monthly DSO is noisier than quarterly because one large invoice landing late in the month can swing it, so watch the trend across several months rather than reacting to one.
No. Only credit sales belong in the calculation. Anything paid at the point of sale never sat in receivables, so including it drags the number down and hides a collections problem.
They are the same measure under two names. Some finance teams calculate the average collection period using average receivables across the period rather than the closing balance, which smooths out a spike at the period end.
One day of DSO is worth one day of sales. Divide your credit sales for the period by the days in it to get your daily figure, then multiply by the number of days you close the gap by. That is cash moving from your customer's account to yours, without selling anything more.
The annoying version is the untargeted one: the same template to everybody on a fixed timer, including people who already paid. Chasing works when it knows who it is talking to, what they owe, how they have paid before, and when to stop and hand over to a person.
If the gap between your DSO and your terms is worth real money, the fix is usually not a stricter credit policy. It is something that notices every slip on the day it happens and follows up without anybody having to remember. Tell us how you invoice today and we will tell you honestly whether that is worth building.
Book a 30-min call →