Days Sales Outstanding (DSO): What It Is and How to Improve It

What is DSO?

DSO measures the average days it takes to collect payment after a sale. It's one of the clearest indicators of how efficiently your business turns invoices into cash.

How to calculate DSO

DSO = (Accounts Receivable ÷ Total Credit Sales) × Number of Days

Example: accounts receivable of $150,000, credit sales of $450,000 over 90 days: DSO = ($150,000 ÷ $450,000) × 90 = 30 days, you collect, on average, 30 days after invoicing.

What is a good DSO?

It depends on your industry and terms. General guidance for AU/NZ businesses :

"DSO is a great diagnostic, but you can do everything right on collections and still have a 30-day hole between doing the work and getting paid. That gap is the thing, and it's exactly what on-demand finance closes."

Shane, Head of Growth, FundTap

How to reduce your DSO

• Invoice immediately, don't delay after delivery.
• Set exact due dates, "Due 14 March 2026", not "net 30".
• Offer multiple payment methods, make paying easy.
• Remind before the due date, a nudge 3–5 days out reduces late payment.
• Follow up within 7 days overdue, consistently.
• Consider early-payment incentives, a small discount can speed collection.
• Use invoice finance, FundTap releases invoice value the same day regardless of when customers pay, cutting your cash-to-cash cycle to near zero; the median first fund is 3 days from sign-up (FundTap data, 2026).

DSO vs cash position

DSO measures collection speed, but the thing that actually bites is the cash gap. Even a 30-day DSO creates a 30-day gap between earning and receiving. For high-cost, thin-margin businesses, that gap matters. Invoice finance addresses it directly, you don't have to fix your DSO to fix your cash position. FundTap's average advance runs about $32K over roughly 33 days (FundTap data, 2026).

Frequently asked questions