Days sales outstanding

Days sales outstanding measures, on average, how many days it takes a company to collect payment after making a sale on credit. It is calculated as accounts receivable divided by revenue, multiplied by the number of days in the period.

A rising days sales outstanding can be an early warning sign that customers are taking longer to pay, or that a company is loosening its credit terms to win more sales, either of which is worth investigating further since it can eventually show up as cash flow pressure even while reported revenue still looks healthy.