Glossary / DSO
DSO(Days Sales Outstanding)
Days sales outstanding (DSO) measures the average number of days it takes to collect payment after a sale or invoice. It is calculated from accounts receivable, credit sales, and days in the period. DSO is a cash-flow metric for wholesale, professional services, manufacturing, and other invoice-based businesses.
Formula
DSO = Accounts receivable / Credit sales x Days in period
Example
If a distributor has $300,000 in accounts receivable, $900,000 in quarterly credit sales, and 90 days in the quarter, DSO is 30 days. If DSO rises to 45, cash is taking longer to collect.
Why it matters
DSO turns collections into a trend line. Rising DSO can signal slower-paying customers, invoice disputes, or weak collections before cash pressure becomes obvious.
Related terms
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