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Finance & Payments

Days Sales Outstanding (DSO)

Also known as: DSO

Days sales outstanding (DSO) is the average number of days a business takes to collect payment after making a sale on credit.

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DSO measures how quickly a company turns its receivables into cash. A lower DSO means customers pay faster and cash cycles back into the business sooner; a rising DSO can signal collection problems, over-generous terms or customers in difficulty. It is the receivables counterpart to days payable outstanding on the buying side.

Suppliers watch DSO closely because it directly affects working capital and cash flow. Improving it — through prompt invoicing, clear terms, credit checks and disciplined collections — releases cash without needing external financing.

Example

If a supplier makes RM900,000 of credit sales in a 90-day quarter and has RM300,000 in receivables, its DSO is (300,000 / 900,000) × 90 = 30 days.

Frequently asked questions

What is days sales outstanding?
DSO is the average number of days a business takes to collect payment after a credit sale — a measure of how quickly receivables turn into cash.
What does a high DSO indicate?
A high or rising DSO suggests customers are paying slowly, which can point to collection issues, terms that are too generous, or customers in financial difficulty.

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