Daily Sales Outstanding Formula

Daily Sales Outstanding Formula

See Also:
Daily Sales Outstanding (DSO)
Daily Sales Outstanding Calculation
Problem With Days Sales Outstanding Example
Days Inventory Outstanding
Operating Cycle Analysis
Days Payable Outstanding
Unlock Cash in Your Business

Daily Sales Outstanding Formula

The DSO formula is the basic way to calculate daily sales outstanding. In application a very valuable performance indicator becomes evident. Use the following DSO formula below:

Daily Sales Outstanding = 365 X (Average Accounts Receivable / Total Credit Sales)

The formula is derived from an understanding that a company’s success is measured by returns. More specifically, it refers to the notion that the more receivables are collected, the better off a company is faring. The “365” refers to the number of days contained in the recording period. If you calculate an overall estimate of Daily Sales Outstanding for the year, utilize 365 as an appropriate figure; representing the 365 days in the year.

Accounts Receivable Explanation

The average accounts receivable is fairly straight forward. This figure represents the overall amount that a company is owed. As the receivables goes up, that means that the company is making more sales overall. More clients owe the company money and therefore the net worth is increasing. At the same time, however, if receivables continues to increase, that means that the company has money that it has not collected yet (outstanding dues). The final important aspect of this formula is the total number of sales. The total number of credit sales refers to the total number of sales made as a whole. It makes sense for this number to be the denominator of this formula because of the fact that the total number of sales acts as a success indicator as a whole.

DSO & Accounts Receivable

At the end of the day, as the Daily Sales Outstanding formula yields lower figures, the organization continues to collect the money owed to them. This is what makes the recording period so important. When introducing the number of days in the recording period into the equation, translate the overall success of the company into the timeline of the collecting period. Using the Daily Sales Outstanding formula, the company can determine the outstanding balance of returns that they are owed on a daily basis.
Additionally, you can compute the Daily Sales Outstanding formula in two very similar ways. The first method is the one that is listed above, using the average accounts receivable. The other method takes the overall accounts receivable instead of the average. Many companies use the average accounts receivable because it gives a more accurate picture of the company’s performance.
If you want to reduce your DSO, download our free A/R Checklist to see how simple changes in your A/R process can free up a significant amount of cash.
daily sales outstanding formula
[box]Strategic CFO Lab Member Extra
Access your Cash Flow Tune-Up Tool Execution Plan in SCFO Lab. The step-by-step plan to get ahead of your cash flow.
Click here to access your Execution Plan. Not a Lab Member?
Click here to learn more about SCFO Labs[/box]
daily sales outstanding formula


The Struggles of Private Company Accounting

Hiring the right accountant  When I meet a business owner operating at a successful $10 million in revenue, they often mention, “My CPA”… I immediately know that CEO/Entrepreneur is referring to their Tax CPA.  That is because one thing that all Entrepreneurs have in common is that they must file a tax return.  So, from

Read More »


Friend of the firm, Birgit Kamps, recently had Strategic CFO President, Dan Corredor, as a guest on her podcast, CEO Blindspots. CEO BLINDSPOTS HOST: Birgit Kamps. She was speaking five languages by the age of 10, and lived in five countries with her Dutch parents prior to becoming an American citizen. Birgit’s professional experience includes starting

Read More »

SHRM calls ICHRA the 401K for Group Health Benefits

Fed-up with group health insurance? ICHRA is the new way to offer great health benefits and avoid ACA penalties, SHRM calls it the 401K for group health benefits.  In 2020 the Department of Labor, HHS and IRS changed the rules for employer health benefits. They changed the Affordable Care Act mandates and penalties for every

Read More »


Financial Leadership Workshop

MARCH 28TH-31ST 2022



Strategic CFO™ Financial Leadership Workshop
The Art of the CFO®


September 12-15th 2022