Definition
What is days sales outstanding (dso)?
Days sales outstanding measures the average time between making a credit sale and collecting the cash, calculated as accounts receivable divided by credit sales for a period, multiplied by the number of days in that period. It is a working-capital measure, not a collections-performance score.
Updated 4 September 2026
Why it matters
- One day of DSO is worth roughly one day of average credit sales in cash that could otherwise be used or not borrowed.
- It is the clearest euro translation available for order-to-cash improvements.
- Splitting it into pre-invoice and post-invoice intervals shows whether the problem is yours or your customer's.
Business example
A company with €12m of annual credit sales finds average daily credit sales of roughly €33,000, so removing four days of DSO releases about €130,000 of cash on a one-off basis.
Common misconceptions
- 'High DSO means poor collections.' It frequently means slow or inaccurate invoicing upstream.
- 'The cash release is annual.' The release is one-off; the recurring benefit is the financing cost avoided.
- 'Industry benchmarks settle the question.' Payment terms and customer mix differ so much across European markets that your own trend is the more useful comparison.
Related concepts
- Order-to-cash
- Working capital
- Process intelligence
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