Days Sales Outstanding DSO Importance and How to Calculate DSO

Day sales outstanding formula. Here’s an example to better show how the calculation works. Consider a company with revenue of $1 million and an average accounts receivable balance for the year of $150,000. You would calculate DSO as follows: ($150,000 / $1 million ) x 365 days = ~55 days.. Further, April has 30 days. Hence, the number of days is 30. He then refers to the DSO formula: DSO = Average A/R / Total Credit Sales (Number of Days) And performs DSO calculation: DSO = $22,500 / $45,000 (30) At this rate, Yo-han figures out that for the given period, it takes him 15 days to collect credit sales.

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A high DSO may lead to cash flow problems in the long run. DSO is one of the three primary metrics used to calculate a company’s cash conversion cycle. What is the Formula for Days Sales Outstanding? To determine how many days it takes, on average, for a company’s accounts receivable to be realized as cash, the following formula is used.. The DSO calculator can help you take control of your finances. With it, you can calculate your debtors’ days outstanding, understand your credit risk exposure, and predict cash flow shortages. By using the DSO calculator, you can make more informed decisions about when to extend credit and when to collect payments. Starting accounts receivable.