DSO Formula
DSO = (accounts receivable ÷ total credit sales) × days in period
A lower DSO means faster collections. Compare your DSO against your own stated payment terms (e.g. Net 30) — a DSO significantly higher than your terms signals collection problems, not just slow-paying customers.
What Counts as a Good DSO?
There's no universal "good" DSO — it depends on your industry and your own payment terms. As a rule of thumb, a DSO within 10-15 days of your standard term (e.g. 40-45 for Net 30 terms) is typical; a DSO well beyond that suggests either lenient enforcement or real collection issues worth investigating.