Days Sales Outstanding

A metric measuring the average number of days it takes a business to collect payment after a sale has been made, calculated by dividing accounts receivable by average daily revenue.

Days sales outstanding reveals how efficiently a business collects what it has earned. A high DSO ties up cash in unpaid invoices and signals a collections process that needs tightening. Reducing it even by a few days can meaningfully improve cash flow.

A founder has £25,000 in outstanding receivables and averages £1,000 in daily revenue. Her days sales outstanding is 25 days. She realises her competitors collect in 14 days on average and introduces automated payment reminders, reducing her DSO to 18 days and freeing up £7,000 in cash.