Days Sales Outstanding (DSO) represents the time needed for your company to be paid by its clients. It is usually computed over a period of time (monthly, quarterly or yearly).

💡 There are several methods to calculate it, but the basic principle is :

meaning

DSO = (Outstanding amount due at the end of a period / Gross sales done and paid over this period) x Number of days on the period

👉 For example:

If over a year you have done 5,000,000€ in sales, and at the end of the year (on Dec. 31st), you still have 300,000€ in outstanding amounts.

Your DSO for the year will be: (300,000 / 5,000,000) x 365 = 21.9 days.

Your clients take on average 21.9 days to pay you.

💡 In this article we will talk about how we calculate your DSO in CashCollect and how to analyse it.

You can find your DSO in the CashCollect app in your Analytics page 👉 check our dedicated article on all your Accounts receivables analytics.

❗We need several months of history to compute your DSO. If there is not enough data available, your monthly DSO will not be available.

We compute your DSO using your invoice data in CashCollect and by using the count-back method.

This method goes back in time month-by-month (that's why it's called the count-back method). The numbers of gross sales (revenue) and accounts receivable (outstanding amounts) for each end of the month are needed.

👉 Depending on the situation of your current month, there are two options:

1️⃣ If your AR is superior to your Sales.

DSO = DSO of the ongoing months (nb of days in the current month) + Sum of the DSO at the end of the last month(s)

For example, if today is Apr.5th, Outstanding amount = 1000€ and Revenue made since Apr.1st = 800€, then DSO of the ongoing month = 4 days.

Since the outstanding amount IS NOT settled, the sum of DSO at the end of the last month(s) is taken into account until the outstanding amount is settled by the past revenues.

2️⃣ If your AR is inferior to your Sales:

DSO = (AR / Sales) x number of days since beginning of the month

For example, if today is Apr.25th, Outstanding amount = 800€ and Revenue made since Apr.1st = 1000€, then DSO of the ongoing month = (800 / 1000) x 25 = 20 days.

The outstanding amount IS settled, the sum of DSO at the end of the last month(s) is not taken into account.

In the case of option 1️⃣, the DSO at the end of the previous month(s) must be taken into account - how is it computed and until when?

👉 The sum of DSO at the end of the last month(s) is taken in account only if Outstanding amount at the end of the month ≥ Revenue of the month.

And you can calculate the Outstanding amount at the end of the month by doing:

👉 So for each past month, the calculation method is the same:

For example, if we are nov. 26th, and want to compute the DSO at the current day.

Since the outstanding amount is not settled during the current month, the DSO must be calculated by adding the intermediate calculation of the end of the previous months until the outstanding amount is settled. We thus have the following intermediate calculus:

👉 In that case the DSO on the day of Nov26th is 26 + 31 + 21,43 = 78.43 days → round number to DSO = 78 days.