What is DSO?

Day's Sales Outstanding (DSO) is the average number of days that a company takes to collect revenue after a sale has been made. A low DSO number means that it takes a company fewer days to collect its accounts receivable and vice-versa. In terms of a company, a low DSO is favourable to a higher one, as it reduces the opportunity cost that is associated with accrued revenue, which means that the quicker a sale can be turned into money, the greater the cash flow through the company is, and the quicker this money can be reinvested elsewhere.