Days Sales Outstanding Formula

The Days Sales Outstanding (DSO) formula evaluates the average duration needed for a business to receive payment from customers following a sale. It is derived by dividing the total accounts receivable by the overall credit sales and then multiplying the result by a chosen time period (like a month). DSO offers insights into how proficiently a company handles its receivables: a lower DSO signifies swifter collections, while a higher DSO implies lengthier collection times.