Enter your receivables, credit sales and the length of the period to see your average collection period in days.
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A profitable business can still run out of cash if customers pay slowly. DSO measures the gap. Compare it with your payment terms: if you invoice on 30-day terms and your DSO is 52, customers are paying three weeks late and that cash is stuck in receivables.
DSO = (accounts receivable ÷ credit sales) × number of days in the period. Use credit sales only, not cash or POS sales.
Compare it with your own payment terms. A DSO within about 10 days of your terms is usually healthy; a DSO far above terms signals late-paying customers or weak follow-up.
Invoice on delivery, state payment terms clearly, send statements and reminders, and track ageing every week. A statement of account makes it easy for customers to see what is overdue.