---
title: "Days Sales Outstanding (DSO): Definition & Formula | Jirav"
description: DSO is a measure of the average number of days it takes for a company to collect payments after a sale has been made. Here's how it's calculated.
---

[Standard Metrics Library ](https://www.jirav.com/standard-metrics-library)

# [Days Sales Outstanding (DSO): Definition & Formula | Jirav](https://www.jirav.com/standard-metrics-library/days-sales-outstanding)

 Written by [Jirav](https://www.jirav.com/standard-metrics-library/author/jirav) | Apr 25, 2023 2:56:46 PM

### What is DSO?

DSO is a measure of the average number of days it takes for a company to collect payments after a sale has been made. In other words, it's the amount of time it takes for a company to convert its accounts receivable into cash.

### Why DSO Is Important

DSO is an important metric for businesses as it indicates how quickly they are able to collect payments from their customers. A high DSO can indicate that a company is experiencing cash flow issues, while a low DSO indicates that a company is able to collect payments quickly and efficiently.

A high DSO can also lead to a strain on a company's working capital, as cash is tied up in accounts receivable for longer periods of time. This can make it difficult for a company to pay its bills and meet its financial obligations in a timely manner.

### How to Calculate DSO

To calculate DSO, divide the accounts receivable balance by the total credit sales for a given period, and then multiply that number by the number of days in that period. The formula for calculating DSO is:

DSO = (Accounts Receivable / Total Credit Sales) x Number of Days in Period

For example, if a company has $100,000 in accounts receivable and $500,000 in total credit sales for a 30-day period, the DSO would be:

DSO = ($100,000 / $500,000) x 30 = 6 days

This means that it takes the company an average of 6 days to collect payment from its customers after a sale has been made.

[View full post](https://www.jirav.com/standard-metrics-library/days-sales-outstanding)

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