Debtor days (DSO) calculator

What this calculator does

Debtor days — also called days sales outstanding, or DSO — is the average number of days it takes your customers to pay you after you invoice them. It is the single most telling number in credit control: every extra day is a day your cash is sitting on someone else's balance sheet instead of yours.

This tool takes your trade debtors and your annual credit sales and returns your DSO in days, the cash freed for each day you reduce it, and how much you'd release by hitting a target. It is built for UK limited companies that want to see, in pounds, what slow payment is costing them — and what tightening collections would be worth.

How to use it

Take two figures from your accounts, plus an optional target:

1. Trade debtors — the total currently owed to you by customers (the debtors or accounts-receivable figure on your balance sheet or in your software).
2. Annual credit sales — your sales made on credit over the year. If most sales are on credit, total turnover is a fair proxy; strip out anything paid immediately at point of sale.
3. Target debtor days — optional. Enter the collection period you're aiming for to see the cash it would release.

Run it each month and watch the trend. A DSO drifting upward is the earliest sign that credit control is slipping, long before it shows up as a cash crunch.

How to read the result

The headline is your debtor days. Compare it with your stated payment terms: if you invoice on 30 days but your DSO is 55, customers are routinely paying three weeks late and that gap is funded entirely from your own pocket. A DSO close to — or below — your terms means collections are healthy.

The cash freed per day reduced figure puts a price on improvement: it is one day's worth of credit sales, the amount that returns to your bank for every single day you cut off the average. The final figure shows the lump sum released if you reach your target. Together they turn 'chase invoices faster' from a chore into a number worth acting on.

The formula in plain English

The core calculation is one ratio scaled to a year:

DSO = (trade debtors ÷ annual credit sales) × 365

In words: what fraction of a year's sales is still sitting unpaid, expressed in days. The cash impact of improving it is even simpler:

Cash freed per day = annual credit sales ÷ 365

That is one average day of trade. So on £500,000 of credit sales, each day shaved off DSO returns about £1,370 to your bank. Pull your average in by ten days and you release roughly £13,700 — cash you already earned, just collected sooner.

Worked example

A company is owed £62,000 by customers and makes £500,000 of credit sales a year. It invoices on 30-day terms and wants to get there.

DSO = (£62,000 ÷ £500,000) × 365 = 45 days — so customers are paying about a fortnight late. Each day of trade is £500,000 ÷ 365 = roughly £1,370. Closing the gap from 45 days to the 30-day target — 15 days — would release about 15 × £1,370 = £20,500 of cash, permanently, with no borrowing at all. Figures are illustrative; the saving is simply your own money, collected on time.

Limitations and what to do next

DSO is an average, so a single large overdue invoice — or one slow-paying major customer — can distort it. It also uses a year-end snapshot of debtors, which can flatter or worsen the picture if your sales are seasonal. For a sharper view, look at an aged debtors report alongside this number to see which invoices are late, not just the average.

If your DSO is high, the answer is firmer credit control: clear terms, prompt invoicing, automated reminders and, where it helps, deposits or early-payment incentives. The credit control checklist sets out the steps. Where the gap between earning and being paid is structural, invoice finance or a short-term facility can bridge it. Pair this with the cash conversion cycle calculator. This is general information, not financial advice.