Actual DSO (Days Sales Outstanding): meaning

Actual DSO (Days Sales Outstanding) is the measure of the actual average days to collect payment. It is calculated by dividing total trade receivables on the balance sheet by average daily revenue over the last 12 months. The common mistake is to use the nominal contractual days instead of the observed data: the cash forecast must be built on actual data, not on the contractual agreement. An attention threshold is triggered when DSO exceeds the nominal contractual terms by 20%.

Distinctive: actual average days to collect payment
Distinctive: observed data
Essential: trade receivables on the balance sheet
Essential: average daily revenue
Constant: last 12 months
Constant: attention threshold

Glossary

Actual DSO (Days Sales Outstanding)

A measure of the actual average number of days it takes to collect payment, calculated on observed data, as distinct from the nominal contractual payment terms.