DSO (Days Sales Outstanding)

A financial metric measuring the average number of days it takes a business to collect payment after a sale is made.

Days Sales Outstanding (DSO) measures how quickly a business collects cash from its credit sales. It is one of the most important working capital metrics for any business.

Formula:

DSO = (Accounts Receivable / Net Credit Sales) x Number of Days

What DSO tells you:

  • Low DSO (< 30 days): Customers pay quickly, healthy cash flow
  • Medium DSO (30-60 days): Normal for B2B businesses in India
  • High DSO (> 60 days): Slow collections, potential cash flow issues

Industry benchmarks in India:

  • IT Services: 60-90 days
  • Manufacturing: 45-75 days
  • FMCG/Retail: 15-30 days
  • Professional Services: 30-60 days

How to improve DSO:

  • Invoice promptly — same day as delivery
  • Offer early payment discounts
  • Automate payment reminders
  • Track aged receivables weekly, not monthly
  • Set credit limits and enforce payment terms

ReckOps tracks DSO across all customers, flags overdue invoices automatically, and sends payment reminders to reduce your DSO.

Related Terms

DPO (Days Payable Outstanding)

A financial metric measuring the average number of days a business takes to pay its suppliers after receiving an invoice.

Aged Receivables (Aging Report)

A report categorizing outstanding customer invoices by how long they have been unpaid, typically in 30-day buckets.

Cash Flow (Statement & Management)

The movement of money in and out of a business, tracked through the Cash Flow Statement showing operating, investing, and financing activities.

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