Days sales outstanding (DSO)
Days sales outstanding (DSO) is the average number of days it takes to collect payment on invoiced revenue, calculated from outstanding receivables against billed revenue — the standard measure of how fast the book converts invoices into cash.
The inputs.
- Outstanding receivablesUnpaid invoice balance across the book at a point in time.
- Billed revenueTotal invoiced revenue for the period — the denominator DSO is measured against.
- Read withTime to invoice — how long a completed job sits before it's billed at all.
What to know.
How to calculate days sales outstanding
DSO equals outstanding receivables divided by total billed revenue for the period, multiplied by the number of days in the period. It's an end-of-period snapshot, so it's read as a trend across months or quarters rather than as a single-point truth — a late payment wave or a big project close-out can move the number in one period. It's best read alongside time to invoice, since the lag between completing a job and billing it is built into DSO.
Why DSO matters for commercial contractors
Field service runs on working capital — payroll, parts, and fuel are paid long before customers pay you — so DSO is a direct measure of how much of the shop's cash is tied up financing its customers. On a 10-to-200-tech book, a few days of DSO movement swings real money, and it's one of the first numbers a lender or partner asks about. Agreement-heavy books with scheduled billing tend to carry lower DSO than time-and-materials books, where every job is an invoice-and-chase cycle.
What drives DSO down
The levers are faster invoicing, clear payment terms written into agreements, consistent follow-up on aging invoices, and not waiting for job-close paperwork before billing. The largest single driver is usually time to invoice — revenue that's billed a day later is revenue collected a day later, before collection behavior even enters the picture. Agreement billing on a fixed schedule keeps DSO predictable compared to per-job invoicing.
How Thermal supports cash flow
Thermal generates invoices from completed work order data, so the invoice date and the completion date sit on the same record and time to invoice and DSO roll up without a separate spreadsheet. Aging is tracked as part of the invoicing record, giving the office the same data the books are built from. QuickBooks Online sync is in early access; the Sage Intacct and Business Central adapters are on the roadmap.
Questions attached to this term.
What's a good DSO for a field service contractor?
There's no universal figure — it depends on your payment terms and mix of agreement versus time-and-materials work. If your terms are net-30 and DSO trends well above 30 days, collections are lagging; otherwise watch the trend against your own baseline.
How is DSO different from time to invoice?
Time to invoice is the lag between completing a job and billing it. DSO is the full cycle from invoice to cash. Time to invoice is the half you control internally; DSO also includes how fast customers pay.
Does DSO include agreement revenue billed on a schedule?
It typically includes all receivables against billed revenue, however the billing cadence works — which is why an agreement-heavy book usually carries lower DSO than one built on per-job invoices.
How does DSO relate to working capital?
Lower DSO means the book converts invoices into cash faster, which reduces how much the shop needs to borrow to cover payroll and parts between jobs and payments.
These numbers, on your own book.
If you want to see them calculated from real work orders and agreements rather than a spreadsheet, that's a demo.