Accounts Receivable Days Formula
Back to GlossaryWhat is Accounts Receivable Days Formula? The Accounts Receivable Days Formula—also known as Days Sales Outstanding (DSO)—measures the average number of days it takes a company to collect payment after a sale. It is calculated as:
DSO = (Accounts Receivable / Total Credit Sales) × Number of Days
This metric provides insight into the efficiency of a company’s collections process and the liquidity of its receivables. A lower DSO indicates faster collections and better cash flow, while a higher DSO may signal potential issues with customer payments or credit policies. Finance leaders use this formula to benchmark performance, identify trends, and guide working capital strategies.
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