Guides · Bookkeeping
Days sales outstanding (DSO), explained
Days sales outstanding — DSO — is a simple gauge of collection speed: on average, how many days a business takes to turn a credit sale into cash. A low number means fast collection; a rising one is a warning.
What DSO measures
DSO expresses the average time between making a credit sale and collecting the money, drawn from receivables against sales over a period. It turns the aging picture into a single, trackable number.
On its own a DSO figure means little; it is the trend and the comparison — against your own terms and your past — that carry the message.
What a rising DSO signals
A DSO climbing above your payment terms means collections are slowing: money you have earned is sitting with customers longer, tying up cash you could be using. It often flags weak follow-up, a struggling customer, or terms that are not being enforced.
Because slow collection strains cash even in a profitable business, watching DSO is watching the health of your working capital.
How Lekha keeps collection visible
Lekha tracks each bill to payment with buyer-wise aging and a follow-up log, so slow-paying buyers and lengthening collection show up in the ledger rather than only in a year-end ratio.
Lekha records what your documents say and tracks the money on both sides — what you owe and what you are owed. It records and tracks; it does not replace your accountant.
Questions
- What is days sales outstanding?
- A measure of how long, on average, a business takes to collect a credit sale — turning the aging picture into a single, trackable number.
- What does a rising DSO mean?
- Collections are slowing and cash is tied up with customers longer. It can flag weak follow-up, a struggling customer, or terms not being enforced.
- Why does DSO matter?
- Because slow collection strains cash even in a profitable business, so DSO is a read on the health of working capital.