Accounts Receivable Days (DSO) Calculator
Days Sales Outstanding (DSO) tells you the average number of days it takes your business to collect payment after a credit sale. Enter your accounts receivable balance and annual revenue, and the calculator returns your DSO, average monthly revenue, and a rough collections-efficiency figure. A lower DSO means you turn sales into cash faster and have healthier working capital.
Formula
DSO = Accounts Receivable / (Annual Revenue / 365)
Monthly Revenue = Annual Revenue / 12
Collections Efficiency = 30 / DSO × 100
Example Calculation
Inputs
- Accounts Receivable (PKR): 500000 PKR
- Annual Revenue (PKR): 5000000 PKR
With 500,000 in receivables and 5,000,000 in annual revenue, daily sales are 5,000,000 ÷ 365 ≈ 13,699, so DSO = 500,000 ÷ 13,699 ≈ 36.5 days — it takes about 36-37 days on average to collect payment.
Frequently asked questions
What is Days Sales Outstanding (DSO)?
It is the average number of days between making a credit sale and receiving the cash. It measures how quickly you collect from customers.
How is DSO calculated?
DSO = accounts receivable ÷ (annual revenue ÷ 365). In other words, receivables divided by average daily sales.
What is a good DSO?
It depends on your industry and payment terms, but a DSO close to or below your stated terms (for example 30 days) is healthy. Much higher suggests slow collections.
Why does a high DSO matter?
A high DSO ties up cash in unpaid invoices, which can strain working capital and cash flow even when sales are strong.
How can I lower my DSO?
Invoice promptly, tighten credit terms, follow up on overdue accounts, and offer incentives for early payment.