DSO (Days Sales Outstanding)

The average number of days between invoicing a customer and being paid. (Accounts receivable ÷ revenue) × days in the period.

Example

£60,000 of receivables against £30,000 of monthly revenue is a DSO of about 60 days.

Important

Cutting DSO is the cheapest financing available to a startup — it pulls money you have already earned forward, with no dilution and no interest.

Related terms

• Accounts receivable — Money customers owe you for work already delivered.
• Working capital — Current assets minus current liabilities — the money tied up in running the business day to day, mostly receivables and payables.
• Cash flow — The actual movement of money in and out of your bank account, as distinct from revenue you have earned but not been paid.

Lessons that explain it

• Working capital and why growth eats cash — The money trapped between doing the work and being paid for it. It is why profitable, growing companies run out of money — and it is the cheapest financing you are not using. (12 min)

All 176 terms in the Founder glossary