FAQ

How to Calculate DSO?

The formula for calculating days sales outstanding or DSO is as follows:

(Average Accounts Receivables  ÷ Net Credit Sales) * Number of Days) = DSO

DSO measures the number of days it takes to convert sales made on credit to cash. Companies use this metric to measure collection efficiency and help forecast cash flows.

Net Credit Sales refers to all sales made on credit minus returns and allowances. The number of days refers to the time period measured.

What’s the Average DSO per Industry?

DSO varies per industry and could vary depending on the economic conditions. DSO levels have been steadily deteriorating since 2019 due to payment delays. You can benchmark your DSO against peers to evaluate payment collection efficiency.

Here is the average DSO for the following industries:

DAYS
Business Services 46.74
Chemicals and Allied Products 38.5
Construction-Special Trade Contractors 51.46
Consumer Goods – Furniture and Fixtures 36.1
Petroleum Refining and Related Industries 23.67
Industrial and Commercial Machinery and Computer Equipment 39.4
Stone, Clay, Glass, and Concrete Products 36.4
Electronic & Other Electrical Equipment & Components 43.44
Wholesale Trade – Durable Goods 42.06
Wholesale Trade – Nondurable Goods 52.2
Printing, Publishing, and Allied Industries 44.3

How to Lower DSO?

Companies selling on credit aim to lower DSO because they get paid faster. Here are some tips to make your collection strategies more effective:

  • Produce reliable and timely accounts receivable information
  • Impose stricter credit requirements for new clients
  • Enable more payment options
  • Ask buyers for a deposit, down payment, or guarantee

Using a platform like Apruve to automate trade credit and accounts receivable processes helps decrease DSO.

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