This days sales outstanding template demonstrates the calculation of the number of days it takes to collect all accounts receivable.
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Days Sales Outstanding (DSO) represents the average number of days it takes credit sales to be converted into cash, or when a company’s account receivables can be collected. DSO can be calculated by dividing the total accounts receivable during a certain period of time by the total net credit sales. This number will then be multiplied the number of days in the period of time.
The period of time used to measure DSO can be on a monthly, quarterly, or annual basis. If the result has a low DSO, then it means that the business takes fewer days to collect the receivables. On the other hand, a high DSO entails that it takes more days to collect receivables. In turn, a high DSO may lead to cash flow problems in the long run. A DSO is one of the three measurements that helps determine the cash conversion cycle.
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