How do you calculate days sales outstanding (DSO)?
Days sales outstanding (DSO) is the average number of days it takes a company to collect what customers owe. It's calculated as accounts receivable divided by net sales, times the number of days in the period. For consumer brands selling wholesale, it shows how long retailers are holding the brand's cash.
Formula
Accounts receivable ÷ net sales × days in period
Example
A hypothetical beauty brand has $500,000 of open receivables at month-end and $300,000 of net sales in the 30-day month. DSO = $500,000 ÷ $300,000 × 30 = 50 days.
How to read it
Lower is better. Because net sales include DTC and Amazon orders that are paid almost immediately, a brand that grows DTC can see DSO fall even while wholesale customers pay more slowly; check aging by customer too. A single large wholesale shipment late in the month raises DSO temporarily without anything being wrong.
What moves it
- Payment terms offered to wholesale and retail accounts
- Retailer chargebacks and deductions that hold up payment
- Timing of large wholesale shipments within the month
- Channel mix between wholesale and immediately-paid DTC sales
- Collections follow-up and invoicing accuracy
What to do when it's flagged
- Review the AR aging by customer to find the slow payers
- Follow up on past-due invoices and resolve disputed deductions
- Tighten terms or require deposits for new or slow-paying accounts
- Consider factoring or a receivables-backed line if collections are squeezing cash
How Inflection tracks it
Inflection's KPI Monitor flags DSO as Watch above 45 days and Critical above 60 days by default; each client's thresholds are adjusted to their customer terms.
Accounts receivable comes from the QuickBooks balance sheet and net sales from the QuickBooks P&L, measured over the calendar days in the period.
Updated 2026-10-11. Example figures are hypothetical.