{"id":75917,"date":"2025-11-16T15:00:34","date_gmt":"2025-11-16T14:00:34","guid":{"rendered":"https:\/\/www.cashontime.com\/en\/?p=75917"},"modified":"2026-05-22T11:41:29","modified_gmt":"2026-05-22T10:41:29","slug":"calculate-dso","status":"publish","type":"post","link":"https:\/\/www.cashontime.com\/en\/articles\/calculate-dso\/","title":{"rendered":"How do you calculate DSO?"},"content":{"rendered":"

Are you looking to improve your company\u2019s cash flow by managing your average collection period? DSO (Days Sales Outstanding)<\/strong><\/a> is the key metric for measuring the average time between a sale and payment by your customers. Learn about calculation methods, real-world examples, and strategies for optimizing this key component of your company\u2019s financial health.<\/p>\n

How do you calculate DSO?<\/h2>\n

DSO (Days Sales Outstanding) measures the average number of days it takes to collect accounts receivable<\/strong><\/a>. This metric reflects the efficiency of accounts receivable<\/strong> collection. A high DSO ties up cash, while a low DSO<\/a> improves liquidity<\/strong>. Monitoring this metric allows you to adjust payment terms and anticipate cash flow constraints.<\/p>\n

Comparison table of DSO calculation methods, including their advantages and disadvantages<\/em><\/p>\n\n\n\n\n\n
Method<\/strong><\/td>\nBenefits<\/strong><\/td>\nDisadvantages<\/strong><\/td>\n<\/tr>\n
Accounting Method (Standard)
\nFormula: (Accounts receivable, including tax \/ Revenue, including tax) \u00d7 Number of days in the period<\/td>\n		\u2022 Ease of calculation
\n\u2022 Easy to compare companies
\n\u2022 Allows you to distinguish between current and past-due balances<\/td>\n		\u2022 Does not take into account fluctuations in revenue
\n\u2022 Less accurate in the event of significant seasonal fluctuations
\n\u2022 Requires a good understanding of accounts receivable.<\/td>\n<\/tr>\n
Roll-Back Method (or Countback Method)
\nPrinciple: Gradually deduct the gross sales amount from the accounts receivable balance until it is fully paid off, by adding up the corresponding days<\/td>\n		\u2022 Suitable for businesses with seasonal fluctuations or fluctuations in C
\n\u2022 Enables a detailed analysis of changes in accounts receivable<\/td>\n		\u2022 A more complex calculation to implement
\n\u2022 Less standardized, making comparisons between companies difficult<\/td>\n<\/tr>\n<\/tbody>\n<\/table>\n

Calculating DSO using the accounting method<\/h3>\n

This accounting method<\/strong> uses data from the balance sheet and income statement to assess accounts receivable collection. It calculates accounts receivable by dividing them by daily revenue (including tax). This standardized approach facilitates comparisons between companies. It is particularly suitable for stable businesses without significant seasonal fluctuations<\/strong>. Accounts receivable represent sales that have not yet been paid as of a given date<\/p>\n

Example: For a company with \u20ac120,000 in accounts receivable and \u20ac900,000 in revenue (including tax) over 365 days. The DSO formula is applied as follows: (accounts receivable \/ revenue including tax) \u00d7 number of days in the period. That is, (120,000 \/ 900,000) \u00d7 365. The DSO is therefore 48.67 days.<\/p>\n

Calculating DSO using the depletion method<\/h3>\n

The working capital turnover method is more complex; it involves calculating the number of days of revenue required to cover all accounts receivable. This more precise approach takes seasonal variations into account<\/strong>. It is suitable for businesses with irregular business cycles.<\/p>\n

To help you calculate your DSO, we have created a downloadable Excel template.<\/p>\n

Using this Excel template, you will be able to:<\/p>\n