Days Sales Outstanding (DSO) is the average number of days it takes a business to collect payment after a sale is made — calculated as (Accounts Receivable / Revenue) × Days in Period. Lower DSO means faster cash collection. Industry benchmarks: trucking 30–90 days, B2B services 30–60 days, restaurants 0–1 day (cash).
DSO measures how quickly a business turns credit sales into cash. Formula: DSO = (Accounts Receivable Balance / Revenue) × Number of Days in the Period. A business with $150K in AR on $1.5M in 90-day revenue has a DSO of 9 days — very fast. The same AR against $500K in 90-day revenue is a DSO of 27 days — still reasonable. DSO is a direct input to the Cash Conversion Cycle and to accounts receivable financing decisions. High DSO means money is locked in unpaid invoices rather than in cash. Invoice factoring and invoice financing products exist specifically to monetize this locked receivable. Common DSO benchmarks by industry (per Federal Reserve Small Business Credit Survey and BLS sectoral data): restaurants and retail 0–3 days (cash/card sales); healthcare 30–60 days (insurance billing); B2B professional services 30–60 days; trucking and freight 30–90 days; construction 60–120 days. Construction's long DSO is a primary driver of the industry's high working-capital financing demand. The Federal Reserve's Small Business Credit Survey (https://www.fedsmallbusiness.org/survey/2024/report-on-employer-firms) documents how DSO and cash-flow timing drive small-business financing demand. The BLS Quarterly Census of Employment and Wages (https://www.bls.gov/cew/) provides industry-level data supporting DSO benchmarks by sector.
Lower is better, but the right benchmark depends on your payment terms and industry. If your standard terms are net-30 and your DSO is 35 days, collections are running efficiently. If DSO is 65 days on net-30 terms, you have a collections problem. Aim for DSO within 10 days of your stated payment terms.
High DSO increases working-capital need and can signal collections problems. Lenders underwriting a business with DSO over 60 days on net-30 terms will ask about the collections process. For invoice factoring and invoice financing, DSO and AR quality directly determine advance rates and eligibility.