DSO (Days Sales Outstanding) Calculator
Days Sales Outstanding (DSO) measures how quickly your business collects payment from customers. A lower DSO indicates faster collection and stronger cash flow.
Case Study: LoneStar HVAC Solutions
Business Name: LoneStar HVAC Solutions
Industry: Commercial HVAC Installation and Maintenance
Monthly Credit Sales: $90,000
Accounts Receivable (Month-End): $135,000
Billing Terms: Net 30
Problem
LoneStar HVAC was experiencing cash flow challenges despite steady sales. A review by their bookkeeper revealed that clients were delaying payments, possibly beyond their Net 30 terms.
Using the DSO Calculator
Formula:
DSO = (Accounts Receivable ÷ Credit Sales) × Number of Days
Inputs:
Accounts Receivable = $135,000
Credit Sales = $90,000
Billing Period = 30 days
Calculation:
DSO = (135,000 ÷ 90,000) × 30 = 45 days
What This Means
The company was collecting payments in 45 days instead of 30. This 15-day lag was putting strain on their ability to pay suppliers, cover payroll, and fund new projects.
Results
- Introduced early payment incentives
- Added automated reminders at day 25
- Engaged a B2B collection agency for invoices over 60 days
In less than two months, their average DSO dropped from 45 to 32 days—boosting cash flow and operational efficiency.
