Contractor Finance Glossary
What is Days Sales Outstanding (DSO)?
Also called: DSO
Days sales outstanding is the average number of days it takes to collect payment after invoicing, calculated as accounts receivable divided by revenue, times the number of days in the period.
DSO turns your receivables into a single number you can trend. A contractor with strong margins and rising DSO is quietly funding customers, and the cash gap widens every month even as the P&L looks fine.
Contractor DSO runs higher than most industries because of progress billing and retainage. The point is not to hit a universal target but to know your number, trend it monthly, and separate ordinary receivables from retainage so you are managing two different collection problems, not one blended one.
How it is calculated
DSO = (average accounts receivable divided by total credit revenue for the period) times the number of days in the period. Track it monthly and exclude or separate retainage to see true collection speed.
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