Days Sales Outstanding (DSO)
Days Sales Outstanding (DSO) measures the average number of days it takes a company to collect payment after a sale. Calculated as (Accounts Receivable / Total Credit Sales) x Number of Days, DSO is a key indicator of AR efficiency and cash flow health. Lower DSO means faster cash collection, improved working capital, and reduced credit risk. Fintech companies typically target DSO below 30 days through automated invoicing, payment reminders, and cash application.
Key Details
- Formula: DSO = (Accounts Receivable / Net Credit Sales) x Number of Days in Period
- Industry benchmarks vary: SaaS companies average 40-60 days, while B2B manufacturing can exceed 90 days
- Reducing DSO by even 5-10 days can significantly improve working capital and reduce borrowing needs
- Key drivers of high DSO: manual invoicing, slow cash application, weak collections processes, and dispute handling delays
- Automated AR platforms reduce DSO through instant invoice delivery, payment reminders, and AI-powered cash application
- Best-in-class DSO improvement: eliminate paper checks, offer multiple payment methods, and automate matching
- Track DSO trends monthly — sudden increases may signal customer credit issues or process breakdowns