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Getting paid

What is DSO (days sales outstanding) in construction?

Quick answer

Days sales outstanding (DSO) is the average number of days it takes to get paid after you invoice. In U.S. construction it commonly runs 60 to 90 days, roughly double the level analysts consider healthy. A lower DSO means cash arrives sooner, which is often the difference between making payroll comfortably and scrambling.

How to read your DSO

Compare your DSO to your payment terms. If you bill Net 30 but your DSO is 75, customers are paying 45 days late on average. Tracking DSO by customer reveals who is reliably slow, which is exactly who you should chase first and price carefully when you bid.

How to bring it down

Invoice the day work is billable, send reminders before and after the due date, escalate the slow payers sooner, and make it easy to pay. Small, consistent collection habits can move DSO by days, and on a real receivables balance that is meaningful cash.

Frequently asked questions

What is a good DSO for a contractor?
Lower is better, and it depends on your terms, but pulling DSO toward your stated terms (for example Net 30 to 45) is a strong goal in a sector where 60 to 90 days is common.
How do I calculate DSO?
Divide accounts receivable by total credit sales for a period, then multiply by the number of days in that period.

Keep reading

How do contractors get paid faster?Read How can a contractor improve cash flow?Read What is a payer score, and how do you predict slow-paying customers?Read

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