In accountancy, Days Sales Outstanding (also called Days Receivables) is a calculation used by a company to estimate their average collection period. A low number of days indicates that the company collects its outstanding receivables quickly. The Days Sales Outstanding (DSO) figure is an index of the relationship between outstanding receivables and credit account sales achieved over a given period. The DSO analysis provides general information about the number of days on average that customers take to pay invoices.

DSO is considered an important tool in measuring liquidity. DSO tends to increase as a company becomes less risk averse. Higher DSO can also be an indication of poor follow up on delinquencies, or higher DSO might be the result of inadequate analysis of applicants for open account credit terms. An increase in DSO can result in cash flow problems, and may result in a decision to increase the creditor company's bad debt reserve.

Days Sales Outstanding, or DSO, is calculated as: Total Outstanding Receivables at the end of the period analyzed divided by Total Credit Sales for the period analyzed (typically 90 or 365 days), times the number of days in the period analyzed. That is,

{{{
DSO = (Receivables/Sales) * Days in Period (can use average receivables as a more conservative estimate)
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finance_public
created
Fri, 04 Feb 2011 15:22:17 GMT
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dirkjan
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Fri, 04 Feb 2011 15:22:17 GMT
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dirkjan
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M12
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creator
dirkjan