What is DSO?
Days sales outstanding (DSO) is the average number of days a company takes to collect payment after a credit sale, calculated as receivables divided by credit sales, times days in the period.
In more detail
If receivables are $900,000, credit sales for the quarter are $2.7 million and the period is 90 days, DSO is 30 days. Lower generally means cash arrives faster. Watch for distortions from seasonal sales, a few large customers and one-off invoices. Track it next to an aging report, because an average can hide a handful of very late accounts. The levers are accurate invoices sent on time, e-invoicing, automated reminders before and after the due date, and clean dispute handling. Collection speed is capped by the terms you grant, so DSO work often starts with the contract.
Example
An agency sends reminders three days before the due date, on it and a week after. Disputes go to the account owner with the invoice and email thread attached. The finance lead watches whether DSO moves from 52 days toward 45 (illustrative figures).