Accounts Receivable Days Calculator (DSO)
Days sales outstanding (DSO) measures how efficiently a company collects cash from credit sales. Enter the accounts receivable balance and annual revenue to get DSO in days, daily revenue, and a plain-English assessment of collection performance. Accounts receivable (net of allowance for doubtful accounts) appears in current assets on the balance sheet. Annual revenue appears at the top of the income statement. Both figures are in every SEC 10-K and 10-Q filing. DSO below 30 days is excellent; 30 to 45 is good for typical net-30 terms; 45 to 60 is fair; above 60 days warrants a review of your credit and collections process. For quarterly data, substitute quarterly revenue times 4 for annual revenue. DSO is one of the three components of the cash conversion cycle, alongside days inventory outstanding and days payable outstanding.
Formula
Daily revenue = Annual revenue / 365
DSO = (Accounts receivable / Annual revenue) x 365
Interpretation: below 30 days = excellent; 30 to 45 = good; 45 to 60 = fair; above 60 = review collections
How to use this calculator
- Find net accounts receivable in the current assets section of the balance sheet (use the net figure after allowance for doubtful accounts).
- Find annual revenue (also called net sales or net revenue) at the top of the income statement.
- Enter both values and read DSO in days, daily revenue, and the collection efficiency rating.
- To use quarterly data, multiply the quarterly revenue figure by 4 before entering it as annual revenue.
Frequently asked questions
What does DSO (days sales outstanding) mean?
DSO measures how many days on average it takes a company to collect payment after making a sale. A DSO of 35 days means customers take an average of 35 days to pay their invoices. Lower DSO means faster cash collection and better working capital efficiency. Higher DSO means cash is locked up in unpaid invoices longer.
What is a good DSO?
Below 30 days is excellent and typically indicates strong credit policies, prompt invoicing, and reliable customers. Between 30 and 45 days is good, consistent with standard net-30 payment terms with a small collection lag. Between 45 and 60 days is fair and worth monitoring. Above 60 days often signals collection difficulties, poor credit screening, or excessively lenient payment terms.
Why does DSO matter for a business?
DSO directly affects cash flow. A business with $1 million in monthly revenue and DSO of 60 days has approximately $2 million permanently tied up in uncollected receivables. Reducing DSO by 15 days would free roughly $500,000 of cash. DSO is a key component of the cash conversion cycle (CCC), which measures how long cash is tied up in the operating cycle.
What is the difference between net-30 payment terms and DSO?
Net-30 terms mean invoices are due within 30 days. DSO measures actual payment behaviour. If customers consistently pay late, DSO will exceed 30 days even with net-30 terms. Comparing DSO to your stated payment terms reveals how well those terms are being enforced in practice.
How can a business reduce its DSO?
Effective tactics include invoicing immediately upon delivery or service completion, offering early payment discounts (e.g., 2/10 net 30), tightening credit approval for new customers, following up on overdue invoices systematically, and accepting more payment methods to reduce friction. Factoring receivables is another option but comes at a cost.
Official sources
- Federal Reserve Small Business Credit Survey: www.fedsmallbusiness.org.
- SEC Beginner's Guide to Financial Statements: www.sec.gov.
Reviewed by the CalculatorHub team, edited by James Graham, 14 June 2026. See our methodology.