Days Sales Outstanding (DSO) is the average number of days that customers take to pay their bill. A good DSO value is one that is considered good for your industry. Some industries have 60, 90, or even 120 day payment terms. To find out what your industry average is, contact a credit reference agency for up to date information. The following is a guide if you use 30 days as a payment term: | Very Good | Good | Fair/Poor | Poor | | Under 45 days | 46 - 59 days | 60 - 74 days | Over 75 days | There are a number of ways to obtain a DSO value. Sage 50 Accounts uses the most common: the count back method. The count back method starts by taking the total outstanding balance for a customer, then deducting the latest month's sales balance from the outstanding amount. This is known as absorbing the sales balance. If there is a remaining outstanding balance after absorbing the latest month's sales, then the calculation absorbs the sales balance from the previous month, then the month before that and so on, until no outstanding balance remains. The DSO value is the total number of days sales that can be absorbed into the outstanding debt without leaving a remainder. ExampleYou want to perform a DSO analysis for your customer as at 30 September. Within Customers > Debt analysis >Details > you can view the DSO information. The customer's outstanding balance at 30 September is £15,346.35, which appears in the Receivables Outstanding column. The DSO value for the customer, displayed in the Days Sales Outstanding column, is 211*.* This value is calculated as follows: Month To calculate the DSO value, your software works backwards from the month you're analysing.
In this example, the calculation starts at September's sales values and works back through August, July and so on. | Sales Balance (SI-(SC+SD)) For each month, this value comes from the Customer Record > Sales tab > Sales Balance column. | Remaining Debt This is the value still remaining after absorbing each month's sales into the outstanding balance. | Day Sales This is the number of days worth of sales that the remaining debt represents. | DSO A cumulative total of the days sales values for each month. | | September | 0.00 There were no sales in September, so the sales balance on the customer record Sales tab shows 0.00. | 15,346.35 | 30 After absorbing all of September's sales into the outstanding debt, the full debt still remains. This means that the remaining debt at the end of September represent at least the whole of September's sale.
Because there are 30 days in September the days sales value for the complete month is 30. | 30 | | August | 0.00 | 15,346.35 | 31 After absorbing all of August's sales into the outstanding debt carried forward, the full debt still remains. This means that the remaining debt at the end of August represent at least the whole of August's sales.
Because there are 31 days in August, the days sales value for the complete month is 31. | 61 | | July | 66.29 | 15,280.06 This is calculated as the remaining debt at the end of August minus the sales balance for July.
Sales in July of £66.29 reduce the outstanding debt to £15,280.06. | 31 After absorbing all of July's sales into the outstanding debt carried forward, the full debt still remains. this means that the remaining debt at the end of July represent at least the whole of July's sales.
Because there are 31 days in July, the days sales value for the complete month is 31. | 92 | | June | -42.00 | 15,322.06 A credit sales balance in June increases the remaining debt to £15,322.06. | 30 | 122 | | May | 1,028.13 | 14,293.93 Sales in May of £1,028.13 reduce the remaining debt to £14,293.93. | 31 | 153 | | April | 2,533.31 | 11,760.62 Sales in April of £2,533.31 reduce the remaining debt to £11,760.62. | 30 | 183 | | March | 13,094.42 | -1,333.80 Sales in March were £13,094.42. This absorbs the remaining debt at the end of April (£11,760.62), leaving a remainder of £1,333.80. | * You can't absorb all of March's sales into the remaining debt carried forward from April. If you try to absorb all of March's sales into the remaining debt, there's a negative remainder.
This means that the remaining debt at the end of April does not represent all of March's sales. | ** To the end of April, the DSO value is 183. However, you can't calculate the final DSO value until you know the days sales value for March.
See below to find out how to calculate the days sales value for March. | The sales for March are greater than the outstanding debt remaining at the end of April, and when your software absorbs March's sales into the remaining debt, a negative balance remains. This means that the remaining balance at the end of April, £11,760.62, doesn't represent all of March's days sales, 31 days. To work out what proportion of March's sales this remaining debt represents: Remaining debt at end of April ¸ Sales balance for March x 100, expressed as a percentage. Using the values shown above, this becomes (11,760.62 / 13,094.42) x 100 = 89.81%. So the debt remaining at the end of April represents 89.81% of March's sales. To work out how many days worth of sales this represents, that is, the Days Sales value, Sage 50 Accounts calculates 89.81% of the number of days in March as follows: Days in month ¸ 100 x 89.81 There are 31 days in March, so this becomes (31 / 100) x 89.81 = 27.84. Sage 50 Accounts rounds this value up to 28 days*; in other words, the debt remaining at the end of April represents 28 days worth of March's sales. Adding this value to the cumulative DSO value up to the end of April, 183, this gives a final DSO value of 211 days**.  TIP: To calculate Days Sales Overdue, Sage 50 Accounts absorbs the overdue debts into the monthly sales balances, rather than the outstanding debts.
 NOTE: Running the year end procedure clears the monthly sales values, making DSO calculations over more than 12 months harder to calculate.
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