What DSO means and how to calculate it
DSO is a working-capital metric: it tells you, on average, how many days pass between making a credit sale and collecting the cash. The standard formula is (accounts receivable ÷ total credit sales) × number of days in the period. A DSO of 47 means you wait, on average, 47 days to get paid — and every one of those days is cash parked in the channel instead of in your business.
- Formula — (Accounts Receivable ÷ Credit Sales) × Days in period
- Lower DSO = faster collection = more available working capital
- Distribution DSO often runs 30–60+ days on channel credit
- Cash freed by cutting DSO can fund growth without new borrowing
Why DSO matters in distribution
Distribution runs on channel credit — distributors and retailers buy on terms. That credit drives volume, but it also means a large share of a business's cash is permanently in transit through the channel. When DSO creeps up, working capital tightens, growth stalls, and the business may borrow to fund what should have been collected. Worse, a distributor whose outstanding quietly balloons is often about to stop ordering — so DSO is an early warning signal, not just a finance number.
How to cut DSO
Cutting DSO starts with visibility: a single view of every distributor's outstanding, ageing bucket, and credit limit, so collections work a prioritised list instead of a hunch. Add credit-limit enforcement at order entry, systematic follow-up, and faster reconciliation, and DSO can typically move from the high-40s toward the high-20s — freeing significant one-time working capital plus the financing cost of carrying it.
In SalesPort
DSO calculator + CRM debtor trackingSalesPort's CRM tracks distributor outstandings, ageing, and credit limits on one screen; the DSO calculator models the working capital you free by tightening collections.