If you've ever looked at strong sales numbers and wondered why your bank account tells a different story, your Days Sales Outstanding might hold the answer.

This DSO calculator measures how quickly your business actually collects payment after making a sale. Enter your accounts receivable balance and sales figures, and you'll see exactly how many days your money typically sits in unpaid invoices.

Whether you're a small business owner keeping tabs on cash flow, a bookkeeper preparing financial reports, or a CFO benchmarking against industry standards, DSO cuts through the noise and shows you the reality of your collection process. A high DSO means money lingers in receivables longer than it should. A lower DSO means you're converting sales into usable cash quickly—giving you breathing room to pay suppliers, invest in growth, or simply sleep better at night.

Days Sales Outstanding measures the average number of days between making a sale and actually getting paid for it. Think of it as a reality check for your accounts receivable.

Here's what that means in practice: if your DSO is 45 days, your customers take about six weeks on average to pay their invoices. That's six weeks where your money is stuck in "amounts owed" instead of available in your operating account.

Why does this matter? Because cash flow is what keeps businesses running. You can have fantastic sales on paper, but if customers drag their feet on payment, you might still struggle to make payroll or cover rent. I've seen profitable businesses fail simply because they couldn't collect fast enough to cover their obligations.

The good news is that DSO gives you early warning. When collection times start creeping up, you'll see it in your DSO before it becomes a cash crisis. That's why tracking this number—even just monthly—is one of the simplest things you can do to protect your business.

The calculation is refreshingly straightforward:

DSO = (Average Accounts Receivable ÷ Total Sales) × Number of Days

Let me break down each piece:

Average Accounts Receivable is simply the midpoint between your beginning and ending AR balance. Using the average smooths out any weird spikes from a single large invoice hitting right at period-end.

Total Sales is your revenue for the measurement period. Purists will tell you to use only credit sales (since cash sales don't create receivables), but honestly, total revenue works fine for most businesses—especially if your cash/credit mix stays relatively stable.

Number of Days depends on what period you're measuring: 365 for annual, 90 for quarterly, or 30 for monthly.

Say your AR was $50,000 at the start of the year and $70,000 at year-end. You did $400,000 in sales.

• Average AR: ($50,000 + $70,000) ÷ 2 = $60,000
• DSO: ($60,000 ÷ $400,000) × 365 = 54.75 days

So this business waits about 55 days on average to get paid. Whether that's good or bad depends on the industry and payment terms—which brings us to benchmarks.

"Is my DSO good?" is probably the most common question business owners ask after running this calculation. And the honest answer is: it depends entirely on your industry.

A 60-day DSO would be cause for celebration in construction but a red flag in retail. Context matters.

• Under 45 days: Healthy for most B2B businesses
• 45-60 days: Normal for industries with longer cycles
• Over 60 days: Worth a closer look unless your industry supports it
• Over 90 days: Almost certainly a collection problem

But here's the benchmark that matters most: compare your DSO to your own payment terms. If you offer Net 30 and your DSO is 52 days, customers are consistently paying three weeks late. That gap is the real issue, regardless of industry averages.

Step 1: Enter Your Receivables Pop in your accounts receivable balance from the beginning of your measurement period, then the balance at the end. The calculator handles the averaging for you. (If you only have one AR figure, just enter it in both fields—it'll work fine.)

Step 2: Add Your Sales Enter total sales for the same period. If you want extra precision and your business has significant cash sales, you can use credit sales only. But for most folks, total revenue gives you a perfectly useful number.

Step 3: Set Your Time Period Tell the calculator how many days you're measuring: 365 for a full year, 90 for a quarter, 30 for a month. You can also select weeks or months from the dropdown if that's easier.

Step 4: See Where You Stand The calculator shows your average receivables and your DSO. Compare it to the benchmarks above, and more importantly, compare it to your own results from previous periods. Trends tell you more than any single number.

Sarah runs a digital marketing agency with about a dozen retainer clients. She offers Net 30 terms.

• Beginning AR: $45,000
• Ending AR: $62,000
• Annual Revenue: $580,000

Her DSO: 33.7 days

That's solid. Her clients generally pay within terms, with just a few days of wiggle room. Sarah's collection process is working—she invoices promptly and follows up consistently. No changes needed here.

Mike runs a building supply company selling to contractors. His standard terms are Net 45.

• Beginning AR: $180,000
• Ending AR: $220,000
• Quarterly Revenue: $450,000

His DSO: 40 days

Mike's customers are actually paying five days early on average. That's excellent. His early payment discount (2% off for payment within 20 days) is clearly working. He's got cash coming in faster than expected, which gives him flexibility with his own suppliers.

A machine parts company has been feeling the cash squeeze lately. The owner decides to check the numbers:

• Beginning AR: $340,000
• Ending AR: $410,000
• Annual Revenue: $1,200,000

DSO: 114 days

That's nearly four months to collect payment. Even for manufacturing, where 45-65 days is typical, this is almost double the norm. Something is seriously wrong.

The good news? Now they know. Digging into the aging report revealed two large customers responsible for most of the delay. One was having their own cash problems (time for a tough conversation about payment plans). The other simply had invoices falling through the cracks in their AP department (a few phone calls fixed it). Within three months of focused attention, they brought DSO down to 72 days—still high, but much healthier.

A consulting firm tracks DSO monthly as part of their financial review:

See that steady climb? DSO went from 21 to 33 days in four months. None of those individual numbers look alarming—they're all under 45 days—but the trend is concerning.

Turns out a new project manager wasn't following up on invoices the way the previous one had. Easy fix once they spotted it. If they'd only checked annually, they might not have caught this until it became a real cash crunch.

If your DSO is higher than you'd like, here are strategies that actually move the needle:

Invoice the same day you deliver. This sounds obvious, but you'd be surprised how many businesses wait days or even weeks to send invoices. Every day you delay is a day added to your DSO for no reason.

Offer an early payment discount. "2/10 Net 30" (2% off if paid within 10 days) works surprisingly well. Many customers will take free money, and you get cash 20 days sooner. Run the math on whether that 2% is worth it for your margins—usually it is.

Tighten terms for new customers. There's no rule saying everyone gets the same terms. Require prepayment or Net 15 for new accounts until they've proven reliable. You can always extend better terms later as a reward for good payment history.

Send reminders before invoices are due. A friendly "just a heads up, invoice #1234 is due in 5 days" email often prompts payment. It's much more effective than chasing people after they're already late.

Make paying painlessly easy. Accept credit cards, ACH, and online payments. Include a "Pay Now" link in every invoice. The fewer clicks between your customer and paying you, the faster you'll collect.

Review your aging report weekly. Not monthly. Weekly. Invoices that slip past 30 days overdue have a way of becoming 60, then 90. Catch them early while they're still easy to collect.

This calculator uses the average accounts receivable method, which gives more stable results than using just your ending balance. Some businesses prefer the simpler ending-AR approach, but it can be skewed by unusual activity right at period-end (like a big customer payment hitting December 31st).

The industry benchmarks provided are general guidelines based on typical payment practices across thousands of businesses. Your specific situation—your customer mix, geographic market, competitive environment—might differ. That's why tracking your own trend over time is ultimately more valuable than comparing to any external benchmark.

Tracking DSO takes maybe five minutes a month. That small investment gives you early warning when collection patterns shift, proof when your process improvements are working, and peace of mind when everything's running smoothly.

Even modest improvements matter. Shaving 10 days off your DSO might not sound dramatic, but on $500,000 in annual sales, that's roughly $14,000 freed up from receivables and available in your operating account instead. Over time, those improvements compound into real financial flexibility.