Bramvia — Business Central Experts
DSO tells you how many days of sales are waiting to be collected. The formula, a worked example, how to read it against your payment terms and five ways to bring it down.
Short answer: days sales outstanding (DSO) is the average number of days it takes to collect what you invoice. DSO = accounts receivable ÷ revenue for the period × days in the period. With $1.6M owed by customers and $2.4M invoiced in the last quarter (90 days), DSO is 60 days. Compare it with your payment terms: if you sell at 30 days and DSO is 60, half your cash is arriving a month late.
Next step: see DSO next to vendor and stock days, by business unit and month, in the dashboard below (Day ratios tab). Click any cell to see the customers behind it.
The formula
DSO = Accounts receivable ÷ Revenue in the period × Days in the period
- Accounts receivable: what customers owe you at the end of the period, due and overdue.
- Revenue: invoiced sales in the same period, including the sales tax or VAT you invoiced if your receivables include it, so both sides are measured the same way.
- Days: 90 for a quarter, 365 for a year. A quarter reacts faster to changes; a year smooths seasonality.
Worked example
| Amount | |
|---|---|
| Receivables at the end of September | $1,600,000 |
| Revenue July to September | $2,400,000 |
| Days in the period | 90 |
| DSO | 1.6 ÷ 2.4 × 90 = 60 days |
If you collect $300,000 of overdue invoices, receivables fall to $1.3M and DSO to 49 days: 11 days less, and $300,000 more cash in the bank.
How to read it
- DSO close to your terms: customers pay on time.
- DSO well above your terms: overdue invoices, disputes or slow invoicing. Look at the aged receivables, not just the average.
- DSO rising month after month: something has changed, often a large customer paying later or invoices going out late.
One large late payer can move the whole number, so always check DSO by customer and by business unit, not only for the company.
Five ways to lower DSO
- Invoice the same day you ship. Every day of delay adds a day of DSO.
- Send reminders automatically by level, before and after the due date.
- Hold new orders when a customer is over their credit limit or has old overdue items.
- Fix disputes fast: a disputed invoice is an unpaid invoice.
- Offer direct debit or card payment to small customers.
The process is covered step by step in credit control: process, KPIs and automation.
DSO in Business Central
The aged accounts receivable report shows what is owed by age; customer ledger entries and the reminder terms handle the follow-up, and credit limits can block new orders. A dashboard like the one above calculates DSO by business unit and month from the same data, so nobody rebuilds it in a spreadsheet.
FAQ
Is a lower DSO always better? Usually, but not at any price: very strict terms can cost sales. Track it against the terms you agreed.
Should I use 90 or 365 days? Use 90 to see changes quickly and 365 for year-on-year comparisons. Keep the same choice every time.
What is the difference between DSO and the cash conversion cycle? DSO is one part of it. The cash conversion cycle adds stock days and subtracts vendor days.
Related: days payable outstanding (DPO) and days inventory outstanding and inventory turnover.
Free assessment · Evaluación gratuita
Tell us your current system and how many users you have. First reply within one working day. / Cuéntanos tu sistema actual y cuántos usuarios sois. Respondemos en un día laborable.
Bramvia in: Spain · United States · Mexico · United Kingdom · Ireland · Canada · Colombia · Argentina · Chile · Peru · Australia · New Zealand · South Africa · Philippines · Poland · MCP server · Safety stock calculator