Days sales outstanding (DSO)

Days sales outstanding, or DSO, measures how long on average it takes a business to collect after it invoices. A common way to calculate it is accounts receivable divided by revenue for a period, multiplied by the number of days in that period.

DSO is a direct measure of one side of the float. If your terms say net 30 and your DSO is fifty, the gap tells you something about paperwork, disputes or customers that pay late. Tracking it monthly, and by customer, shows where the delay comes from. Reducing DSO by a week has the same cash effect as a week's worth of revenue arriving early, with no financing cost attached.