## Days Sales Outstanding Template

## How do you calculate days sales outstanding?

The calculation of days sales outstanding (DSO) involves

**dividing the accounts receivable balance by the revenue for the period, which is then multiplied by 365 days**.## How do you calculate DPO and DSO?

**A Look at the Cash Conversion Cycle**

- CCC = Days of Sales Outstanding PLUS Days of Inventory Outstanding MINUS Days of Payables Outstanding.
- CCC = DSO + DIO DPO.
- DSO = [(BegAR + EndAR) / 2] / (Revenue / 365)
- Days of Inventory Outstanding.
- DIO = [(BegInv + EndInv / 2)] / (COGS / 365)
- Operating Cycle = DSO + DIO.

## What is DSO and what is the formula for DSO calculation?

DSO can be calculated by

**dividing the total accounts receivable during a certain time frame by the total net credit sales**. This number is then multiplied by the number of days in the period of time. The period of time used to measure DSO can be monthly, quarterly, or annually.## How is DSO improvement calculated?

The DSO can be calculated by

**dividing accounts receivable for a specific period by the annual revenue per day**. For example, if a company’s ending AR was $1,500 and annual revenue was $9,000, you would divide 1,500 by 9,000/360 (for 360 days in a year). So 1,500 / (9,000/360) = 60.## What is Dio in accounting?

**Days inventory outstanding**(DIO) is a working capital management ratio that measures the average number of days that a company holds inventory for before turning it into sales. The lower the figure, the shorter the period that cash is tied up in inventory and the lower the risk that stock will become obsolete.

## What is a good DPO ratio?

Days Payable Outstanding (DPO) is a turnover ratio that represents the average number of days it takes for a company to pay its suppliers. A high (low) DPO indicates that a company is paying its suppliers slower (faster).

**A DPO of 17 means that on average, it takes the company 17 days to pays its suppliers**.## Should DPO be higher than DSO?

Unlike DSO,

**you want your DPO value to be higher because it means you can keep cash within your firm longer**. In this case, a DPO value between the mid-60s and 100+ is typical for most AEC firms.## How much cash could be saved with a 5 day improvement in DSO?

Improving Cash Flow by Reducing DSO

If XYZ Company can reduce its DSO by just 5 days, it can free up **almost $283,000** in cash flow.

## What factors affect DSO?

If revenue increases, receivables rises.

**Current balances, some on extended payment terms**, impact the DSO calculation. Can your collectors collect current balances? If revenue goes down, current AR decreases and so does the DSO.## What is DSO and DIO?

**DIO is days inventory or how many days it takes to sell the entire inventory**. The smaller the number, the better. DIO = Average inventory/COGS per day. Average Inventory = (beginning inventory + ending inventory)/2. DSO is days sales outstanding or the number of days needed to collect on sales.