DSO (Days Sales Outstanding) is a key indicator that measures the average number of days it takes for you to get paid after issuing an invoice. This value is calculated over a period (monthly, quarterly, or yearly) and helps you track the efficiency of your collection process over time. A lower DSO often means your clients pay you quickly, improving your liquidity.
Your DSO is calculated and displayed as soon as you have at least one client invoice in the entity.
All invoices, except those "in dispute", and credit notes are included in the DSO calculation.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).
DSO Calculation Details
We compute your DSO using the count-back method. This method provides a highly accurate DSO by going back in time, month by month, to determine exactly how many days of sales are tied up in your unpaid invoices.
First, let's define the key terms:
Outstanding Amount: The total value of all unpaid invoices, minus the value of any unused credit notes, on a given month.
Net Revenue: For any month, this is the total value of all invoices issued, minus the total value of all credit notes issued.
The calculation process works as follows:
👉 Step 1: Start with the current month.
We take your total Outstanding Amount and compare it to the Net Revenue of the current period (e.g., from the 1st of the month to today's date).
👉 Step 2: Compare and calculate. There are two possibilities:
1️⃣ If your Outstanding Amount is greater than the month's Net Revenue:
This means all the sales from the entire current month are still unpaid.
We add all the days of this month to our DSO total.
We then subtract the month’s Net Revenue from the Outstanding Amount to find the remaining amount.
We repeat the process by moving to the previous full month, comparing the remaining outstanding amount to that month's Net Revenue. We continue this "count-back" process until the remaining outstanding is finally less than a month's revenue.
2️⃣ If your Outstanding Amount is less than or equal to the month's Net Revenue:
This means your outstanding invoices come from only a fraction of this month’s sales. This is the final step.
DSO = (Outstanding Amount / Net Revenue of the month) x Number of days in the month
Let's check a concrete example
Let's say we want to calculate the DSO on March 31st.
Outstanding Amount on March 31st: €90,000
Net Revenue in March (31 days): €60,000
Net Revenue in February (28 days): €50,000
Since the Outstanding Amount (€90,000) is greater than the Net Revenue for March (€60,000), we need to count back.
Period | Net Revenue of the month | Remaining Outstanding Amount | DSO Calculation for the month |
March | €60,000 | At start: €90,000 | Outstanding > Revenue, so we take all of March. 31 days |
February | €50,000 | Calculated: €90,000 - €60,000 = €30,000 | Outstanding < Revenue, so we calculate the fraction: (€30,000 / €50,000) * 28 = 16.8 days |
Here is the step-by-step breakdown:
March: The outstanding amount (€90,000) is greater than March's net revenue (€60,000). This means all 31 days of March's sales are still outstanding.
DSO so far = 31 days.
Remaining outstanding to account for = €90,000 - €60,000 = €30,000.
February: We now compare the remaining outstanding (€30,000) to February's net revenue (€50,000). The outstanding is less than the revenue. This is our final step.
We calculate the portion of February needed: (€30,000 / €50,000) * 28 days = 0.6 * 28 = 16.8 days.
Total DSO: We add the days from each month together.
Total DSO = 31 days (from March) + 16.8 days (from February) = 47.8 days.
👉 In this example, your DSO on March 31st is 48 days (rounded).
Reproduce the Calculation Yourself
For full transparency, we provide a calculator tool that allows you to verify the DSO calculation using your own data.
You can export your invoice and credit note data directly from Accounts Receivable and paste it into our pre-built Excel template to see the step-by-step logic in action.
Handling Invoices in Different Currencies
All calculations are performed on a given currency. A currency picker is available on the Analytics page to allow you to view the DSO for all specific currencies.