Plain definition
Days sales outstanding (DSO) estimates the average days a company takes to collect credit sales: average trade receivables ÷ credit sales × days in the period. Use credit sales where available; total sales are only a labelled proxy.
Illustrative example
Monetary examples use Saudi riyals (SAR). The same principles apply in other currencies.
A firm has average receivables of and credit sales in a 90-day quarter, so DSO is 15 days. When DSO rises to 24 days next quarter, the finance lead investigates invoice approval and disputed accounts before assuming sales growth explains it.
Why it matters
A higher DSO can consume cash even while revenue rises. It points to collection timing, not a fixed promise of when each invoice will pay.
Practical consequence
Use consistent periods and definitions, track DSO with ageing and the dated cash forecast, and review large customer or contract changes before treating a trend as performance.
Try your own numbers
Measure cash tied up in receivables and inventory, less supplier credit, then test a target cycle.
Working-capital cycle