Days Sales Outstanding is the average number of days taken to collect payment after a sale: accounts receivable divided by revenue, times days in the period.
Days Sales Outstanding, or DSO, is the average number of days between making a sale on credit and collecting the cash. It is calculated as accounts receivable divided by revenue for the period, multiplied by the number of days in that period. It is the receivables mirror of days payable outstanding, and the two sit at opposite ends of the cash conversion cycle.
Receivables are cash the company has earned but does not yet hold, and every day of DSO is a day that cash funds a customer instead of the business. Beyond the financing cost, DSO carries default risk: the probability of collecting an invoice falls sharply once it ages past 90 days, so a drifting DSO is an early warning of write offs and not merely of slow payment. It also constrains growth, because a company whose DSO exceeds its DPO must fund every additional sale from its own balance sheet before the customer pays.
Business Central does not ship a DSO figure either. Customer ledger entries carry the posting date, due date, original amount, remaining amount and the date the entry was closed by an applied payment, which is enough to compute both the classic ratio and the invoice level days to pay. The Aged Accounts Receivable report gives the bucketed balance, payment terms on the customer card set the due date, and reminder terms and finance charge terms drive the dunning cycle. What standard does not do is explain why a given invoice is late: disputes, missing purchase order references and unanswered delivery queries live in email rather than in the ledger, so the reason has to be captured outside the standard tables.
Assume quarterly revenue of 3,600,000 CHF over 90 days, that is 40,000 CHF of sales per day, and an average receivables balance of 1,480,000 CHF. DSO is 1,480,000 divided by 3,600,000, which is 0.4111, multiplied by 90, giving 37 days. If standard terms are net 30, the seven day gap represents 7 times 40,000, that is 280,000 CHF of cash tied up purely by late payment rather than by the agreed terms.
The usual distortions are seasonality and mix. A quarter that ends just after a large shipment shows a high DSO that says nothing about collection performance, which is why many teams use the countback method, subtracting invoiced revenue month by month from the receivables balance until it is exhausted, rather than the simple ratio. The complementary measures are best possible DSO, computed on current receivables only, and the share of receivables past due, which separates a slow collection process from a genuinely delinquent customer base.
DSO measures the whole span from invoice to cash, including the agreed credit period. Average days delinquent measures only the part beyond the due date, so it isolates collection performance from the terms you granted.
Often yes. A large share of late payment traces back to invoices issued late, sent to the wrong address or missing a purchase order reference, so invoicing the same day and delivering electronically usually moves DSO before any collection effort does.
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