days sales outstanding

Definition

The average number of days it takes to collect payment after a sale, abbreviated as DSO. It measures how long customers ignore your invoices before grudgingly paying—lower is better unless you enjoy running a free lending operation.

Example Usage

The DSO increased to 120 days, meaning customers were essentially using the company as an interest-free bank.

Origin

Developed as a cash flow management metric in the mid-20th century.

Fun Fact

Some companies try to game this metric by selling receivables to factors, which technically reduces DSO while admitting they've given up on collecting payment themselves.

Source: Working capital management terminology

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