What is DSO (Days Sales Outstanding)?
Also known as: Days Sales Outstanding, AR days
DSO measures the average number of days it takes to collect payment after a sale. It is a cash-flow metric, not a revenue metric — the gap between booked revenue and cash in the bank.
What is DSO?
If you bill $100k in January and the average customer pays 45 days later, your DSO is 45. DSO measures how long working capital sits in accounts receivable before becoming cash.
How to calculate DSO
DSO = (Accounts Receivable / Total Credit Sales) × Number of Days.
For a monthly view: DSO = (AR at month-end / monthly billings) × 30.
Benchmarks for SaaS
- <30 days — great; mostly automated card billing
- 30–45 — healthy with NET-30 terms
- 45–60 — common with NET-30 and some NET-45 customers
- >60 — collections issue; review terms + dunning
Why it matters
High DSO ties up cash and forces you to fundraise sooner. Reducing DSO by 10 days on a $5M ARR business frees ~$140k of working capital. CFOs watch DSO weekly; it is the fastest lever for cash without raising prices.