{"id":2547,"date":"2026-11-11T10:55:50","date_gmt":"2026-11-11T10:55:50","guid":{"rendered":"https:\/\/www.orama.ai\/?p=2547"},"modified":"2026-11-11T11:07:13","modified_gmt":"2026-11-11T11:07:13","slug":"reduce-days-sales-outstanding-dso","status":"publish","type":"post","link":"https:\/\/www.orama.ai\/en\/academy-tesoreria\/reduce-days-sales-outstanding-dso\/","title":{"rendered":"How to reduce days sales outstanding (DSO) in your small business"},"content":{"rendered":"<p><strong>To reduce days sales outstanding (DSO) in a small business, you need to act at three moments: before you sell (clear terms and short payment periods), when you invoice (invoice the same day, complete and with a due date) and after the due date (chase from day one in a fixed order). Measuring DSO every month and reviewing overdue invoices every week is what makes it work.<\/strong><\/p>\n<p>Every day you wait to get paid is money your business lends to its customers for free. In this post we explain how DSO is calculated, what a reasonable figure looks like and ten practical steps to bring it down. It is part of our <a href=\"https:\/\/www.orama.ai\/en\/academy-tesoreria\/cash-management-small-business\/\">guide to cash management for small businesses<\/a>.<\/p>\n<h2>What DSO is and how to calculate it<\/h2>\n<p>DSO (<em>days sales outstanding<\/em>), or average collection period, measures how many days it takes you on average to get paid for your sales. The most common formula is:<\/p>\n<p><strong>DSO = (outstanding customer balance \u00f7 sales for the period) \u00d7 days in the period<\/strong><\/p>\n<p>For example, if on 31 March you have \u20ac180,000 outstanding and you invoiced \u20ac270,000 in the quarter (VAT included, like the customer balance), your DSO is 180,000 \u00f7 270,000 \u00d7 90 = <strong>60 days<\/strong>.<\/p>\n<p>Three tips to make the figure useful:<\/p>\n<ul>\n<li>Always use the same basis (with or without VAT in both figures) and the same period.<\/li>\n<li>Check it every month and look at the trend, not a single figure.<\/li>\n<li>Compare it with the payment terms agreed with your customers: if you agree 30 days and your DSO is 60, half the problem is collection, not terms.<\/li>\n<\/ul>\n<h2>What is a reasonable DSO?<\/h2>\n<p>In the EU, the Late Payment Directive sets 60 days as the usual maximum payment period between businesses (30 days if no other term is agreed), and the late-payment rules in your country may be stricter. So in most sectors a DSO above 60\u201370 days means something is wrong: either terms are too long or agreed terms are collected late. What matters is comparing your DSO with your average agreed terms and with your days payable outstanding (DPO): if you get paid later than you pay, you are financing the difference.<\/p>\n<h2>10 steps to reduce days sales outstanding<\/h2>\n<h3>Before you sell<\/h3>\n<ol>\n<li><strong>Agree clear terms in writing.<\/strong> In the quote, the order or the contract. Anything not in writing gets negotiated later, almost always at your expense.<\/li>\n<li><strong>Check new customers&#8217; creditworthiness<\/strong> before giving credit, especially on large orders. For first orders, consider a deposit or payment up front.<\/li>\n<li><strong>Offer payment methods that collect themselves:<\/strong> direct debit, card or a payment gateway. They cut delays because they don&#8217;t depend on the customer remembering.<\/li>\n<\/ol>\n<h3>When you invoice<\/h3>\n<ol start=\"4\">\n<li><strong>Invoice the same day<\/strong> you deliver or finish the service. Every day you delay invoicing is one more day of DSO.<\/li>\n<li><strong>Invoice without errors:<\/strong> order number, correct tax details, a visible due date and your bank account. A rejected invoice resets the clock.<\/li>\n<li><strong>On long projects, invoice by milestones<\/strong> instead of everything at the end.<\/li>\n<\/ol>\n<h3>After the due date<\/h3>\n<ol start=\"7\">\n<li><strong>Chase from the first day overdue,<\/strong> in a fixed order: a friendly reminder on day 1, a call on day 7, a second notice on day 15 and escalation to management on day 30.<\/li>\n<li><strong>Review the overdue list every week<\/strong> as part of your <a href=\"https:\/\/www.orama.ai\/en\/academy-tesoreria\/weekly-cash-management-routine\/\">weekly cash routine<\/a> and update the likely payment date in your forecast.<\/li>\n<li><strong>Prioritise by amount and age:<\/strong> a few invoices usually account for most of the delay.<\/li>\n<li><strong>If a customer always pays late, change the terms<\/strong> (deposit, shorter terms) or consider financing their invoices for early payment, bearing in mind that it has a cost.<\/li>\n<\/ol>\n<h2>How DSO affects your cash<\/h2>\n<p>Reducing DSO frees up cash directly. A quick rule: <strong>each day of DSO is worth one day of sales<\/strong>. A small business with \u20ac3M in annual sales (about \u20ac8,200 a day) that cuts its DSO from 65 to 50 days frees up about \u20ac123,000, without borrowing or selling more.<\/p>\n<table class=\"ob-tabla-apilada\">\n<thead>\n<tr>\n<th>Annual sales<\/th>\n<th>Approx. daily sales<\/th>\n<th>Cash freed by cutting DSO by 10 days<\/th>\n<\/tr>\n<\/thead>\n<tbody>\n<tr>\n<td data-label=\"Annual sales\">\u20ac1M<\/td>\n<td data-label=\"Approx. daily sales\">\u20ac2,700<\/td>\n<td data-label=\"Cash freed by cutting DSO by 10 days\">\u20ac27,400<\/td>\n<\/tr>\n<tr>\n<td data-label=\"Annual sales\">\u20ac3M<\/td>\n<td data-label=\"Approx. daily sales\">\u20ac8,200<\/td>\n<td data-label=\"Cash freed by cutting DSO by 10 days\">\u20ac82,200<\/td>\n<\/tr>\n<tr>\n<td data-label=\"Annual sales\">\u20ac10M<\/td>\n<td data-label=\"Approx. daily sales\">\u20ac27,400<\/td>\n<td data-label=\"Cash freed by cutting DSO by 10 days\">\u20ac274,000<\/td>\n<\/tr>\n<tr>\n<td data-label=\"Annual sales\">\u20ac25M<\/td>\n<td data-label=\"Approx. daily sales\">\u20ac68,500<\/td>\n<td data-label=\"Cash freed by cutting DSO by 10 days\">\u20ac685,000<\/td>\n<\/tr>\n<\/tbody>\n<\/table>\n<p>That money improves your <a href=\"https:\/\/www.orama.ai\/en\/academy-tesoreria\/days-of-cash-on-hand\/\">days of cash on hand<\/a> and your working capital, and reduces how much you need from credit lines or other financing.<\/p>\n<h2>Anonymised example<\/h2>\n<div class=\"ob-ejemplo\">\n<p>An installation company with \u20ac4M in sales had a DSO of 78 days against average agreed terms of 45. Analysing its overdue invoices, it found that 70% of the delay came from 12 customers and that it invoiced, on average, 6 days after finishing each job. It took three steps: invoicing the same day from the technician&#8217;s phone, chasing on a fixed schedule (days 1, 7, 15 and 30) and asking customers with the worst track record for a 30% deposit. In five months its DSO fell to 56 days and it freed up about \u20ac240,000 in cash.<\/p>\n<\/div>\n<h2>How Orama helps<\/h2>\n<p>Orama brings the invoices from your ERP (Odoo, Holded, Sage 50, Sage 200, Sage Despachos, a3innuva, Business Central or Oracle NetSuite) into your forecast with their due dates and, when reconciling bank transactions, separates what has been collected from what is still pending. Overdue invoices that haven&#8217;t come in appear as overdue forecasts, so you can chase them and update their date. Start your <a href=\"https:\/\/app.orama.ai\/?register=true\" rel=\"nofollow noopener\" target=\"_blank\">7-day free trial, no card<\/a>. You can also connect our MCP to ask Claude or ChatGPT about your cash.<\/p>\n<h2>Frequently asked questions<\/h2>\n<div class=\"orama-faq\"><details class=\"orama-faq__item\"><summary>What is DSO?<span class=\"pl\">+<\/span><\/summary><div class=\"orama-faq__a\">It is the average collection period: the number of days a business takes on average to get paid for its sales. It is calculated by dividing the outstanding customer balance by sales for the period and multiplying by the days in the period.<\/div><\/details><details class=\"orama-faq__item\"><summary>What is a good DSO for a small business?<span class=\"pl\">+<\/span><\/summary><div class=\"orama-faq__a\">It depends on the sector, but it should be close to the terms agreed with your customers. In the EU, above 60\u201370 days usually signals a problem, because the Late Payment Directive sets 60 days as the usual maximum between businesses.<\/div><\/details><details class=\"orama-faq__item\"><summary>What is the difference between DSO and DPO?<span class=\"pl\">+<\/span><\/summary><div class=\"orama-faq__a\">DSO measures how long you take to get paid and DPO how long you take to pay. If your DSO is higher than your DPO, you finance the gap between them with your own cash.<\/div><\/details><details class=\"orama-faq__item\"><summary>Does early-payment financing reduce DSO?<span class=\"pl\">+<\/span><\/summary><div class=\"orama-faq__a\">It brings the money forward, but it doesn\u2019t make the customer pay sooner, and it has a cost. It is better to reduce DSO with clear terms, fast invoicing and systematic chasing, and to use financing only as support.<\/div><\/details><\/div>\n","protected":false},"excerpt":{"rendered":"<p>How to get paid sooner: what DSO is, how to calculate it and the steps that really reduce your collection days without losing customers.<\/p>\n","protected":false},"author":3,"featured_media":2548,"comment_status":"closed","ping_status":"closed","sticky":false,"template":"","format":"standard","meta":{"content-type":"","_joinchat":[],"footnotes":""},"categories":[19],"tags":[],"class_list":["post-2547","post","type-post","status-publish","format-standard","has-post-thumbnail","hentry","category-treasury"],"_links":{"self":[{"href":"https:\/\/www.orama.ai\/en\/wp-json\/wp\/v2\/posts\/2547","targetHints":{"allow":["GET"]}}],"collection":[{"href":"https:\/\/www.orama.ai\/en\/wp-json\/wp\/v2\/posts"}],"about":[{"href":"https:\/\/www.orama.ai\/en\/wp-json\/wp\/v2\/types\/post"}],"author":[{"embeddable":true,"href":"https:\/\/www.orama.ai\/en\/wp-json\/wp\/v2\/users\/3"}],"replies":[{"embeddable":true,"href":"https:\/\/www.orama.ai\/en\/wp-json\/wp\/v2\/comments?post=2547"}],"version-history":[{"count":1,"href":"https:\/\/www.orama.ai\/en\/wp-json\/wp\/v2\/posts\/2547\/revisions"}],"predecessor-version":[{"id":2555,"href":"https:\/\/www.orama.ai\/en\/wp-json\/wp\/v2\/posts\/2547\/revisions\/2555"}],"wp:featuredmedia":[{"embeddable":true,"href":"https:\/\/www.orama.ai\/en\/wp-json\/wp\/v2\/media\/2548"}],"wp:attachment":[{"href":"https:\/\/www.orama.ai\/en\/wp-json\/wp\/v2\/media?parent=2547"}],"wp:term":[{"taxonomy":"category","embeddable":true,"href":"https:\/\/www.orama.ai\/en\/wp-json\/wp\/v2\/categories?post=2547"},{"taxonomy":"post_tag","embeddable":true,"href":"https:\/\/www.orama.ai\/en\/wp-json\/wp\/v2\/tags?post=2547"}],"curies":[{"name":"wp","href":"https:\/\/api.w.org\/{rel}","templated":true}]}}