What is Days Sales Outstanding?

by Craig Anthony

0 min read

Days sales outstanding measures the number of days it takes a business to collect cash from sales made on credit. The value shows the efficiency of the business’ collections department. It is also called the average collection period or days sales in receivables. The formula is: Days sales outstanding = accounts receivables / total credit sales x number of days. For example, assume in January that a business made $450,000 in sales and had $300,000 in accounts receivables. The number of days in January is 31, so the days sales outstanding is: $300,000 / $450,000 x 31 = 20.67 days. The lower the value of days sales outstanding, the faster the company is collecting the amounts due on credit sales.

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