Days Sales Outstanding (DSO) Calculator
From accounts receivable and credit sales, compute how many days it takes to collect payment (DSO).
Input Data
Results
At a glance:DSO = accounts receivable / credit sales x period days (365 for a year). It shows the average days to collect after a credit sale. Lower = faster collection, better cash flow; higher = slow collection, bad-debt/cash risk. Use credit sales (not total). WARNING: compare within industry, watch seasonality/terms. Education, not advice.
Formula
DSO = accounts receivable / credit sales × period days.
CCC = DSO + DIO − DPO (DSO lengthens the cycle).
$$CCC = DSO + DIO - DPO$$How to Use
- Enter accounts receivable at period end.
- Enter credit sales for the period (exclude cash).
- Enter the period days (365 for a year) for DSO.
FAQ
What is DSO and how is it computed?
DSO = accounts receivable / credit sales x period days (365 for a year). Example: AR 2,000,000, annual credit sales 12,000,000, 365 days → (2,000,000/12,000,000)x365 ≈ 60.8 days. It tells how long, on average, you wait to collect.
Why use credit sales, not total sales?
Because cash sales collect instantly and should not inflate the 'collection period'. Mixing them understates DSO. If credit sales aren't available, estimate or use total sales with a caveat — but prefer credit sales for accuracy.
Is a lower DSO always better?
Generally yes for cash flow, but not absolutely. Too aggressive collection may annoy customers or lose sales to lenient competitors. The goal is DSO near your credit terms (e.g. net 60) — far above signals collection problems; far below may mean overly strict terms hurting growth.
What are the Hong Kong SME implications and caveats?
HK SMEs often rely on credit sales to win clients but then face cash-flow pressure from slow collection; high DSO strains operations and may need factoring or financing. The HKTDC and HKPC advise tightening credit checks and terms. Caveats: (1) use credit not total sales; (2) compare within industry; (3) watch seasonality; (4) large one-off receivables distort. Education, not advice.
How does DSO relate to the cash conversion cycle?
CCC = DIO + DSO - DPO. DSO is the days receivables are outstanding — part of the 'money tied up' before you collect. Lower DSO shortens the cycle and frees cash. Together with DIO (inventory days) and DPO (payables days), managing all three optimises working capital. Use the cash-conversion-cycle calculator to see the combined effect.
Related Tools
References
Content review: Calculatorism Finance Team. Results are for reference only; please refer to the relevant authorities for the official figures.