DSO (Days Sales Outstanding): Measure How Fast You Get Paid

Days Sales Outstanding (DSO) measures the average number of days it takes to collect payment after an invoice is issued. It is a key health indicator.

What DSO tells you

A low DSO means you are paid quickly; a high DSO means money is stuck in receivables. Tracking it shows whether your payment terms and collection efforts are working.

DSO is the gap between your payment terms and reality. If your terms are 30 days but your DSO is 55, clients are paying 25 days late on average.

Rising DSO is an early warning that collection is slipping or clients are struggling. It often signals trouble before it shows up in cash.

Comparing DSO over time and against your own terms tells you whether you are improving or quietly drifting.

• Average days from invoice to payment.
• Low DSO = healthy cash flow.
• High DSO = capital tied up in invoices.
• Compare DSO against your terms.

How to calculate it

The simple formula is: (outstanding receivables / total credit sales) multiplied by the number of days in the period. It gives the average collection time.

For example, CHF 50,000 outstanding on CHF 300,000 of annual sales gives a DSO of about 61 days. The figure is easy to compute from your books.

A simpler check is to look at the average age of your open invoices. A weighted view of how long each unpaid invoice has been open is intuitive.

The exact method matters less than consistency. Use the same calculation each period so trends are comparable.

• DSO = receivables / sales x days.
• Example: 50k / 300k gives about 61 days.
• Or track average age of open invoices.
• Be consistent in the method.

How to improve it

Invoice faster, tighten terms, offer early-payment discounts, and follow up on late invoices sooner. Small improvements compound into meaningfully better cash flow.

Shorten your payment terms where you can. Moving from 30 to 14 days for suitable clients cuts your DSO directly.

Send automatic reminders the moment an invoice is overdue. The sooner you chase, the sooner you are paid.

Offer easy payment methods, including cards and a working QR-bill, so paying takes the client seconds rather than effort.

• Invoice faster.
• Tighten payment terms.
• Follow up on late invoices sooner.
• Make paying easy.

Tracking it over time

Weight the figure by amount: a simple average can be skewed by tiny invoices. A weighted DSO, weighting each invoice by its amount, gives a truer picture.

Review DSO monthly and watch the trend, not a single month in isolation. One slow client can distort a single period.

Segment by client if you can, so you see which customers pay fast and which drag the average up. Deal with the worst offenders directly.