Accounts Receivable Days Calculator

DSO measures the average number of days it takes to collect payment after a sale. Lower DSO means faster collection. Formula: (Accounts Receivable ÷ Annual Revenue) × 365.

A DSO matching your payment terms is ideal. For 30-day terms, 30-35 DSO is good. For 60-day terms, 60-65 is acceptable. Under 30 days is excellent; over 60 days for 30-day terms signals collection problems.

Improve DSO by: invoicing immediately, offering early payment discounts, using direct debit collection, sending automated payment reminders, and reviewing credit terms for slow payers.

DSO and debtor days are the same metric. Debtor days is the more common UK term; DSO is used in US accounting. Both measure average collection period.

High DSO means money is tied up in unpaid invoices instead of being available for expenses and investment. A 10-day improvement in DSO can release significant working capital in businesses with large revenues.

Typical UK DSO by sector: retail 15-30 days, professional services 30-45 days, construction 60-90 days, manufacturing 45-60 days. Construction traditionally has high DSO due to contractual payment terms.

Rising DSO can be an early warning of customer payment difficulties. If a specific customer's DSO increases significantly, it may signal they are experiencing financial problems.

Calculate DSO monthly to track trends. Quarterly is minimum. Sudden increases in DSO require immediate investigation of the accounts receivable ledger.

Best practice: clear credit terms in contracts, credit checks on new customers, automated invoice reminders at 7/14/21 days, telephone follow-up at 30 days, and debt collection referral at 60+ days.

UK government data shows late payment contributes to 50,000 small business insolvencies per year. The Late Payment Act allows statutory interest at 8% + BoE base rate on overdue B2B invoices.

The Late Payment of Commercial Debts Act 1998 gives businesses the right to charge 8% + BoE base rate interest on overdue B2B invoices and claim compensation (£40-£100 per invoice).

DSO should be calculated on net revenue (excluding VAT) compared to accounts receivable (which may include VAT). For consistency, use net figures or consistently use gross figures throughout.