The average number of days it takes a company to collect payment after making a sale on credit. It measures the effectiveness of credit and collection policies.
Straightforward compound from English 'days,' 'sales,' and 'outstanding' (remaining unpaid). This metric became standardized in credit management during the mid-20th century as businesses formalized accounts receivable analysis.
DSO can reveal hidden problems - a suddenly increasing DSO might indicate customers are struggling financially, quality issues with products, or aggressive sales tactics pushing sales to unqualified buyers. It's an early warning system for revenue quality!
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