DSO tells you how long your money is sitting in someone else's hands after you've done the work. A DSO of 20 days means customers pay you, on average, 20 days after invoicing. A DSO of 65 days means your cash is tied up for over two months after every sale — which can cause serious cash flow problems even if revenue is strong.
What's a good DSO?
Greg Crabtree's Simple Numbers framework targets DSO of 30 days or under for most small businesses. In the Ketchup Clarity Report sample, the company had a DSO of 22 days — flagged as a genuine strength. Anything consistently above 45 days warrants attention. Above 60 days is a problem that needs a process fix: tighter payment terms, earlier follow-up, or incentives for early payment.
DSO and cash flow
DSO is one of the most actionable cash flow levers available to a small business. You can't always grow revenue faster, but you can often collect faster. Moving DSO from 60 days to 30 days on $500,000 in annual revenue effectively frees up about $42,000 in working capital — cash that was sitting in uncollected invoices is now in your bank account.
How to improve DSO
Invoice promptly — delays in sending invoices directly add to DSO. Shorten payment terms if clients will accept them. Send automatic reminders before the due date, not just after. Offer ACH or card payment for convenience. For repeat clients with consistent late payment, require deposits or net-15 terms instead of net-30.
See these numbers in your own monthly Clarity Report.
Get Started →