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Definition
Days sales outstanding (DSO) is the average number of days a business takes to collect payment after making a sale on credit. It is another name for debtor days, calculated as receivables divided by sales, times the number of days in the period.
In plain terms
A DSO of 45 means customers take, on average, 45 days to pay. The higher it climbs, the more cash is locked up in unpaid invoices and the wider your funding gap. Falling DSO means cash is coming in faster.
Why it matters
DSO is one of the three levers of the cash conversion cycle and often the biggest and fastest to improve. Track it monthly; a rising trend is an early warning. See how to reduce debtor days.
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