Free calculator

DSO Formula and Calculator

Days sales outstanding (DSO) is the average number of days it takes to get paid after a sale. The formula is accounts receivable ÷ credit sales × days. Use the calculator, or watch Claude or ChatGPT work it out from a set of books.

Work it out here

Example figures from a sample month. Type over them with your own.

Days sales outstanding 19.9days
Turnover a year 18.3×
Quick
030456090+

On average, customers pay 19.9 days after a sale. That's quick: most pay within a month.

Get your real DSO from your books Connect QuickBooks, Xero or NetSuite, then ask Claude or ChatGPT.
Ask your own books

The formula: Accounts receivable ÷ Credit sales × Days

Or ask Claude or ChatGPT

Kipper
Question:

What was our DSO last month?

Answer:
  • Asking Kipper for unpaid invoices and last month's sales…
  • Adding up what customers owe…
  • Dividing by sales on credit…
  • Multiplying by the 31 days in the month…

19.9 days. On average, customers pay about 20 days after a sale. The figures come from your books. The DSO is my arithmetic.

Days sales outstanding · August · Xero
August
Money customers owe$286,400
Sales on credit$446,000
Days in the month31
DSO19.9 days
Question:

Has our DSO changed over the last six months?

Answer:
  • Asking Kipper for six months of sales and invoices…
  • Working out DSO for each month…
  • Charting it…

It's come down, from 23.0 days in March to 19.9 last month. That's the lowest of the six.

Days Sales Outstanding Open

Days Sales Outstanding

Mar to Aug · Xero

DSO, by month

18d20d22d24d
MarAprMayJunJulAug
Question:

Which customers are more than 30 days late?

Answer:
  • Kipper is reading the unpaid invoices by customer…
  • Finding the ones more than 30 days late…
  • Sorting them by amount…

Three customers make up three-quarters of it. Bluepeak Homes is the biggest, at $12,400.

More than 30 days late · 31 August · Xero
CustomerLate
Bluepeak Homes$12,400
Ridgeway Dental$9,800
Crestline Builders$9,100
Question:

How much of what we're owed is overdue?

Answer:
  • Asking Kipper for the age of every unpaid invoice…
  • Grouping them by due date…
  • Adding up each group…

$90,100 is past due. More than two-thirds of what's owed isn't due yet.

Unpaid invoices · 31 August · Xero
Amount
Not yet due$196,300
1 to 30 days late$48,300
More than 30 days late$41,800
Total owed$286,400
Question:

What would DSO be if the invoices over 30 days late were paid?

Answer:
  • Kipper is pulling the invoices more than 30 days late…
  • Taking them off what's owed…
  • Working out DSO again…

17.0 days, down from 19.9. That's my arithmetic on today's invoices.

DSO without the late invoices · August
Amount
Money customers owe$286,400
Invoices over 30 days late-$41,800
Left owing$244,600
DSO17.0 days
Reply to Claude…
Open the live demo

A recorded example. Open the interactive demo to ask your own questions.

The formula

How to calculate DSO

Three steps, using two figures from your books.

01

Find what customers owe

That's your accounts receivable: every unpaid invoice at the end of the period.

02

Find your sales on credit

The sales you invoiced in the same period. Leave out cash sales. They're paid on the spot.

03

Divide, then multiply by the days

Divide what's owed by credit sales. Then multiply by the days in the period, like 31 for a month.

Days sales outstanding

Accounts receivable ÷ Credit sales × Days

The sample month: $286,400 ÷ $446,000 × 31 = 19.9 days.

With average receivables

Average AR ÷ Credit sales × Days

Average AR is the opening and closing figures, halved. It smooths out a month that ends on a big invoice. Here: $288,800 ÷ $446,000 × 31 = 20.1 days.

Receivables turnover

365 ÷ DSO

How many times a year you collect what's owed. Here: 365 ÷ 19.9 = 18.3 times.

Reading it

What is a good DSO?

Lower is better. A healthy DSO is about 1 to 1.5 times your payment terms. So on 30-day terms, 30 to 45 days is normal. Industries differ, so compare yourself with businesses like yours.

Under 30 days

Quick. Most customers pay within a month of the invoice.

19.9 days the sample business

30 to 45 days

Typical for businesses that give customers 30 days to pay.

45 to 60 days

Slow for 30-day terms. It's time to check who's paying late.

Over 60 days

Long. Waiting two months or more to get paid can squeeze cash.

In your books

Find DSO's two figures in your books

What customers owe is on your balance sheet. Your sales are on your profit and loss.

  • Accounts receivable is also the total of your accounts receivable aging report.
  • Use sales from the same period. If you invoice almost everything, revenue is close enough.
  • Divide, then multiply by the days. Here, that's $286,400 ÷ $446,000 × 31 = 19.9 days.
Unpaid invoices · 31 August Sample business
Not yet due $196,300
1 to 30 days late $48,300
31 to 60 days late $27,600
Over 60 days late $14,200
Accounts receivable $286,400
Sales in August $446,000
Days in August 31
Days sales outstanding 19.9 days

Related terms

DSO and the terms people mix it up with

Each one measures how fast money moves. Here's what it means and how to work it out.

Days sales outstanding (DSO)

Average days it takes to get paid after a sale.

AR ÷ credit sales × days

Average collection period

Another name for DSO, usually worked out over a year.

365 ÷ receivables turnover

Receivables turnover

How many times a year you collect what customers owe.

Credit sales ÷ average AR

Days payable outstanding (DPO)

Average days you take to pay your own bills.

AP ÷ cost of sales × days

Days inventory outstanding (DIO)

Average days stock sits before it sells.

Inventory ÷ cost of sales × days

Cash conversion cycle

Days your cash is tied up, from paying for stock to getting paid.

DIO + DSO − DPO

Side by side

A calculator vs asking your books

A calculator works out the figures you type. Here's what changes when Claude or ChatGPT can read your books instead.

Finding the figures
Typing the numbers

Pick what's owed off one report and sales off another.

Connected to your books

Read straight from your invoices and profit and loss.

Matching the period
Typing the numbers

Easy to mix a month of sales with a year of days.

Connected to your books

Each figure comes with its dates, so you can check them.

Why it moved
Typing the numbers

Compare two months of reports yourself.

Connected to your books

Ask why it changed, and see the customers behind it.

Next month
Typing the numbers

Find the figures and type them in again.

Connected to your books

Ask the same question. The figures are current.

Trusting the answer
Typing the numbers

It's only as good as what you typed.

Connected to your books

Every figure traces back to your books.

Connect your books and skip the typing

Start free, connect QuickBooks, Xero or NetSuite, and ask for your real DSO.

Ask your own books See pricing

Both assistants

Use Claude or ChatGPT: Kipper works with both

Your team can use Claude or ChatGPT to work out DSO and ask follow-up questions. Either way, the figures come straight from your books. Click a card to see it in the demo.

Kipper
Question:

What was our DSO last month?

Answer:
  • Asking Kipper for unpaid invoices and last month's sales…
  • Adding up what customers owe…
  • Dividing by sales on credit…
  • Multiplying by the 31 days in the month…

19.9 days. On average, customers pay about 20 days after a sale. The figures come from your books. The DSO is my arithmetic.

Days sales outstanding · August · Xero
August
Money customers owe$286,400
Sales on credit$446,000
Days in the month31
DSO19.9 days
Question:

Has our DSO changed over the last six months?

Answer:
  • Asking Kipper for six months of sales and invoices…
  • Working out DSO for each month…
  • Charting it…

It's come down, from 23.0 days in March to 19.9 last month. That's the lowest of the six.

Days Sales Outstanding Open

Days Sales Outstanding

Mar to Aug · Xero

DSO, by month

18d20d22d24d
MarAprMayJunJulAug
Question:

Which customers are more than 30 days late?

Answer:
  • Kipper is reading the unpaid invoices by customer…
  • Finding the ones more than 30 days late…
  • Sorting them by amount…

Three customers make up three-quarters of it. Bluepeak Homes is the biggest, at $12,400.

More than 30 days late · 31 August · Xero
CustomerLate
Bluepeak Homes$12,400
Ridgeway Dental$9,800
Crestline Builders$9,100
Question:

How much of what we're owed is overdue?

Answer:
  • Asking Kipper for the age of every unpaid invoice…
  • Grouping them by due date…
  • Adding up each group…

$90,100 is past due. More than two-thirds of what's owed isn't due yet.

Unpaid invoices · 31 August · Xero
Amount
Not yet due$196,300
1 to 30 days late$48,300
More than 30 days late$41,800
Total owed$286,400
Question:

What would DSO be if the invoices over 30 days late were paid?

Answer:
  • Kipper is pulling the invoices more than 30 days late…
  • Taking them off what's owed…
  • Working out DSO again…

17.0 days, down from 19.9. That's my arithmetic on today's invoices.

DSO without the late invoices · August
Amount
Money customers owe$286,400
Invoices over 30 days late-$41,800
Left owing$244,600
DSO17.0 days
Reply to Claude…
Open the live demo

Connect once, then ask from either one

Read-only access to QuickBooks, Xero or NetSuite, with the same permissions behind each.

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FAQ

DSO questions

What people ask about days sales outstanding, and how to work it out.

DSO stands for days sales outstanding. It's the average number of days it takes to get paid after a sale.
DSO = accounts receivable ÷ credit sales × number of days. Use the same period for the sales and the days.
Divide accounts receivable by credit sales for the period. Then multiply by the days in it. In the sample month, $286,400 ÷ $446,000 × 31 = 19.9 days.
Use a year of credit sales and 365 days. Many people use average receivables for the year. Add the opening and closing figures, then halve them.
Lower is better. A healthy DSO is about 1 to 1.5 times your payment terms. On 30-day terms, that's 30 to 45 days. Industries differ, so compare yourself with businesses like yours.
Usually. It means customers take longer to pay, so more of your cash is tied up in invoices. Over 60 days deserves a closer look.
Mostly. Very strict payment terms can cost you customers, though. So check your DSO against the terms you offer.
No. Cash sales are paid on the spot, so they'd make DSO look shorter than it is. Use sales on credit. If you invoice almost everything, total revenue is close enough.
DSO is how long customers take to pay you. DPO is how long you take to pay your suppliers. One is money coming in, and the other is money going out.
Cash conversion cycle = DIO + DSO − DPO. It's the number of days your cash is tied up, from paying for stock to getting paid for it.
They measure the same thing two ways. Receivables turnover is how many times a year you collect. 365 ÷ DSO gives you turnover, so 19.9 days is 18.3 times a year.
Yes, in most uses. Average collection period is usually worked out over a full year.
Send invoices as soon as the work is done. Make your payment terms clear. Then follow up on late invoices early, since they keep DSO high. An accounts receivable aging report shows who to call first.
Either customers paid more slowly, or sales fell while what's owed stayed the same. A big invoice near month end can also push it up for a month.
Yes, once it can see your books. Connected through Kipper, it reads your invoices and profit and loss from QuickBooks, Xero or NetSuite, read-only. Then it does the arithmetic and shows its work.
QuickBooks, Xero and NetSuite. Kipper reads invoices and the profit and loss from all three.

Get your real DSO from your books

One read-only connection to QuickBooks, Xero or NetSuite. Then ask Claude or ChatGPT for your DSO, and who's paying late. We'll help you set it up.

Ask your own books Schedule a demo
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