Accounting & Finance
What is Debtor Days (DSO)?
- Debtor Days (DSO)
- Debtor Days (Days Sales Outstanding) measures how long on average it takes to collect payment from customers after invoicing — a key cash flow efficiency metric.
Debtor Days Formula
Debtor Days = (Trade Receivables / Net Credit Sales) × Number of Days. For example, ₹50L average debtors on ₹500L annual sales = 50/500 × 365 = 36.5 days DSO. Lower DSO means faster collection. Industry benchmarks vary: FMCG aims for 15–30 days; B2B services typically runs 45–60 days.
Reducing DSO with ERPNext
ERPNext tools to reduce DSO: dunning (automated reminder emails), credit limit enforcement (blocks orders for overdue customers), payment terms with early payment discounts, and the Accounts Receivable Aging report (prioritises collection efforts on high-value overdue accounts).
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