DSO (Days Sales Outstanding)
DSO, or Days Sales Outstanding, is the average number of days a business takes to collect payment after making a credit sale.
Also called: Days Sales Outstanding, debtor days, collection period
What it means
DSO measures how fast your udhaar comes back. The common formula is:
DSO = (Trade receivables ÷ Credit sales in the period) × Number of days in the period
Use the outstanding balance at the end of the period and only credit sales, not cash sales.
Example: At the end of a 90-day quarter your buyers owe you ₹12,00,000. Credit sales during the quarter were ₹36,00,000.
DSO = (12,00,000 ÷ 36,00,000) × 90 = 30 days.
Why it matters for getting paid
DSO tells you how much of your sales is tied up as credit. If your normal credit period is 30 days but your DSO is 55, buyers are paying almost a month late on average, and you are financing them.
A falling DSO means faster cash and less borrowing. Watch the trend month by month rather than a single number.
DSO is an average, so it can hide a few very old invoices. Pair it with an overdue ageing report, built from your khata, to see exactly which buyers are pulling the number up.
Ways to bring DSO down include reminders before the due date, easy UPI payment, and tracking promises. Read how distributors can reduce DSO.