Accounts Receivable Turnover Calculator

Days Sales Outstanding (DSO) — also called Accounts Receivable Days — measures how many days on average it takes your business to collect payment after a sale. A lower DSO means faster cash collection; a higher DSO means cash is tied up in unpaid invoices and may indicate collection problems.

DSO formula: DSO = (Accounts Receivable ÷ Total Credit Sales) × Number of Days

Where:

• Accounts Receivable (AR): the total amount customers currently owe you (from your balance sheet)
• Total Credit Sales: revenue from sales made on credit (not cash sales) during the period
• Number of Days: the period being measured (30 for monthly, 90 for quarterly, 365 for annual)

Alternative formula using daily sales: DSO = AR ÷ (Total Credit Sales ÷ Days in Period)

Industry benchmark DSO ranges:

• Retail (cash-heavy): < 10 days
• Software/SaaS: 30–45 days
• Manufacturing: 45–60 days
• Construction: 60–90 days
• Healthcare: 40–75 days
• Government contractors: 60–120 days

DSO trend interpretation:

• DSO increasing over time → customers paying more slowly (cash flow risk)
• DSO decreasing → collections improving or payment terms tightened
• DSO > 2× your payment terms → significant collection problem

Worked example: A B2B software company has:

• Accounts Receivable: $185,000
• Credit Sales in the last 90 days: $450,000

DSO = ($185,000 ÷ $450,000) × 90 = 0.4111 × 90 = 37 days

Their payment terms are Net 30. DSO of 37 days means customers pay, on average, 7 days late. This is slightly elevated but within acceptable range.

Cash flow impact: Reducing DSO from 37 to 30 days on $450,000/quarter in revenue frees up: (7 ÷ 90) × $450,000 = $35,000 in working capital — money that can be reinvested rather than sitting in unpaid invoices.