Accounts Receivable Turnover Calculator
Calculate your AR turnover ratio and days sales outstanding (DSO).
Measure how efficiently you collect payments from customers.
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.