How to Calculate Days Sales Outstanding (DSO) in Excel

Measure how quickly customers pay with DSO for a month and a half-year, then see how much cash is tied up beyond your payment terms.

You will learn to

• Calculate DSO for one month
• Calculate DSO for a longer period with average receivables
• Measure the cash tied up beyond payment terms

How it works

Days sales outstanding (DSO) estimates how many days, on average, it takes customers to pay. The formula is accounts receivable ÷ credit sales × number of days in the period. A DSO of 35 on Net 30 terms means customers are paying about five days late on average.

For a longer period, use the average receivables balance across the months and the total credit sales and days for the whole period. A useful follow-up is the receivables you would hold if customers paid exactly on terms (daily sales × term days): the difference is cash you could free up by improving collections.

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