1. What is Days Sales?

Days Sales, also known as Days Sales Outstanding (DSO), measures the average number of days it takes a company to collect payment after a sale has been made. It indicates the efficiency of a company's accounts receivable management.

2. How Does the Calculator Work?

The calculator uses the Days Sales formula:

Where:

• \( \text{Receivables} \) — Accounts receivable balance (currency)
• \( \text{Daily Sales} \) — Average daily sales (currency/day)

Explanation: This ratio shows how many days' worth of sales are tied up in accounts receivable at any given time.

3. Importance of Days Sales Calculation

Details: Monitoring Days Sales helps businesses understand their cash flow cycle, identify collection issues, and improve working capital management. A lower number indicates faster collection and better liquidity.

4. Using the Calculator

Tips: Enter receivables in currency units and daily sales in currency per day. Both values must be positive numbers. Daily sales can be calculated by dividing total sales by the number of days in the period.

5. Frequently Asked Questions (FAQ)

Q1: What is a good Days Sales value?
A: It varies by industry, but generally 30-45 days is considered good. Compare with industry averages and your company's credit terms.

Q2: How do I calculate Daily Sales?
A: Divide total sales for a period by the number of days in that period. For example, monthly sales ÷ 30 days.

Q3: Why might Days Sales increase?
A: Increases could indicate slower collections, extended credit terms, or issues with customer creditworthiness.

Q4: Can Days Sales be too low?
A: Extremely low values might suggest overly strict credit policies that could limit sales growth.

Q5: How often should Days Sales be calculated?
A: Monthly calculation is recommended for ongoing monitoring of accounts receivable performance.