TL;DR: Days Sales Outstanding (DSO) is the average number of days it takes to collect payment after invoicing. Lower is better. Most Australian and NZ small businesses should aim for a DSO under 45 days.
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 | Read |
|---|
| Under 30 days | Excellent, you collect quickly |
| 30–45 days | Good, consistent with 30-day terms |
| 45–60 days | Needs attention, customers paying late |
| Over 60 days | Cash risk, act now |
"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 within hours 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).
See how FundTap works → Rated 5★ on Google (117 reviews) · 4.9★ on the Xero App Marketplace (107 reviews).
Frequently asked questions
What does DSO mean?
Days Sales Outstanding, the average number of days it takes to collect payment after issuing an invoice. A lower DSO means you get paid faster.
How do you calculate DSO?
DSO = (Accounts Receivable ÷ Total Credit Sales) × Number of Days. For $150k AR and $450k credit sales over 90 days, DSO = 30 days.
What is a good DSO for a small business?
Under 30 days is excellent and 30–45 days is good for standard 30-day terms. Over 60 days signals a cash-flow risk that needs action.
How can I reduce my DSO?
Invoice immediately, set exact due dates, send reminders before and after the due date, offer easy payment methods, and consider early-payment incentives.
What's the difference between DSO and cash flow?
DSO measures collection speed; your cash position is the actual money in the bank. Even a low DSO leaves a timing gap between earning and being paid.
Can invoice finance lower my DSO?
It doesn't change the metric, but it removes the impact, FundTap releases invoice value within hours, so slow-paying customers no longer hold up your cash.
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