1. What is Days Sales?

Days Sales (also called Days Sales Outstanding or DSO) measures the average number of days it takes a company to collect payment after a sale has been made. It's an important metric for assessing accounts receivable efficiency and cash flow.

2. How Does the Calculator Work?

The calculator uses the Days Sales formula:

Where:

• Accounts Receivable — Total amount owed to the company by customers
• Net Credit Sales — Total sales made on credit (excluding cash sales)
• Number of Days — Time period being analyzed (typically 365 for annual)

Explanation: The ratio shows how many days' worth of sales are tied up in receivables.

3. Importance of Days Sales Calculation

Details: Days Sales helps businesses understand their cash conversion cycle, assess credit policies, and identify potential collection problems. Lower values generally indicate faster collection of receivables.

4. Using the Calculator

Tips: Enter accounts receivable and net credit sales in the same currency. For annual DSO, use 365 days. For quarterly analysis, use 90 or 91 days. All values must be positive numbers.

5. Frequently Asked Questions (FAQ)

Q1: What is a good Days Sales value?
A: Ideal DSO varies by industry, but generally values under 45 days are good. Compare to your industry average and payment terms.

Q2: Should I include cash sales in the calculation?
A: No, only credit sales should be included as cash sales don't create receivables.

Q3: How often should DSO be calculated?
A: Most businesses calculate it monthly to track trends, but quarterly is acceptable for some.

Q4: What if my DSO is increasing?
A: Increasing DSO may indicate collection problems, lenient credit terms, or customers paying slower.

Q5: How can I improve my DSO?
A: Strategies include offering early payment discounts, tightening credit policies, improving invoicing processes, and following up on overdue accounts.