{
  "slug": "agency-dso-impact",
  "title": "Days Sales Outstanding Cost Calculator",
  "heading": "DSO Cash Cost Calculator",
  "category": "financial",
  "url": "https://www.revenuelab.fyi/toolbox/agency-dso-impact",
  "summary": "Price what slow-paying clients cost you in tied-up working capital.",
  "description": "Days sales outstanding measures how long revenue sits as an invoice before it becomes money. Every extra day locks up working capital you either finance or forgo returns on. This calculator converts your annual revenue and average DSO into the dollar value of cash permanently trapped in receivables, prices that at your cost of capital, and shows what improving DSO by a target number of days would release in one-time cash and recurring financing savings. For an agency doing $2M at 62 days, moving to 40 days frees roughly $120,000 of cash — usually a bigger win than any cost-cutting exercise available in the same quarter.",
  "formula": "Trapped cash = (Annual revenue ÷ 365) × DSO. Annual carrying cost = trapped cash × cost of capital. Cash released = (Annual revenue ÷ 365) × days improved.",
  "dateModified": "2026-08-25",
  "run_url": "https://www.revenuelab.fyi/api/public/calc?tool=agency-dso-impact",
  "inputs": [
    {
      "id": "revenue",
      "label": "Annual revenue",
      "kind": "number",
      "hint": null,
      "default": 2000000,
      "unit": "$",
      "min": 1,
      "max": null
    },
    {
      "id": "dso",
      "label": "Current DSO",
      "kind": "number",
      "hint": null,
      "default": 62,
      "unit": "days",
      "min": 1,
      "max": null
    },
    {
      "id": "target",
      "label": "Target DSO",
      "kind": "number",
      "hint": null,
      "default": 40,
      "unit": "days",
      "min": 1,
      "max": null
    },
    {
      "id": "cap",
      "label": "Cost of capital",
      "kind": "number",
      "hint": "Line-of-credit rate, or return you'd earn elsewhere",
      "default": 11,
      "unit": "%",
      "min": 0,
      "max": null
    }
  ],
  "outputs": [
    {
      "id": "trapped",
      "label": "Cash trapped in receivables",
      "format": "currency",
      "hint": null,
      "primary": true
    },
    {
      "id": "carrying",
      "label": "Annual carrying cost of that cash",
      "format": "currency",
      "hint": null,
      "primary": false
    },
    {
      "id": "released",
      "label": "One-time cash released at target DSO",
      "format": "currency",
      "hint": null,
      "primary": false
    },
    {
      "id": "savings",
      "label": "Recurring annual saving",
      "format": "currency",
      "hint": null,
      "primary": false
    },
    {
      "id": "daysImproved",
      "label": "Days improved",
      "format": "number",
      "hint": null,
      "primary": false
    }
  ],
  "worked_example": {
    "inputs": [
      "Annual revenue: 2000000 $",
      "Current DSO: 62 days",
      "Target DSO: 40 days",
      "Cost of capital: 11 %"
    ],
    "outputs": [
      "Cash trapped in receivables: $339,726.03",
      "Annual carrying cost of that cash: $37,369.86",
      "One-time cash released at target DSO: $120,547.95",
      "Recurring annual saving: $13,260.27",
      "Days improved: 22"
    ]
  },
  "how_to": {
    "title": "How to use this",
    "steps": [
      "Enter annual revenue ($).",
      "Enter current dso (days).",
      "Enter target dso (days).",
      "Enter cost of capital (%) — Line-of-credit rate, or return you'd earn elsewhere.",
      "Read your cash trapped in receivables on the right — it updates as you type.",
      "Hit Share to keep the scenario or send it to someone."
    ]
  },
  "scenarios": [
    {
      "name": "Conservative",
      "description": "Lower-end numbers — what if things land soft?",
      "values": {
        "revenue": 1200000,
        "dso": 37,
        "target": 24,
        "cap": 6.6
      }
    },
    {
      "name": "Typical",
      "description": "Defaults — the most common real-world setup.",
      "values": {
        "revenue": 2000000,
        "dso": 62,
        "target": 40,
        "cap": 11
      }
    },
    {
      "name": "Ambitious",
      "description": "Higher-end numbers — what if things really pop?",
      "values": {
        "revenue": 3200000,
        "dso": 99,
        "target": 64,
        "cap": 17.6
      }
    }
  ],
  "limitations": [
    "Results are estimates before tax, fees, and inflation unless an input explicitly covers them.",
    "Rates are treated as fixed for the whole period — variable-rate products will drift from this projection.",
    "This is educational maths, not financial advice. Check anything contractual with the lender or your accountant."
  ],
  "faq": [
    {
      "q": "What DSO is normal for an agency?",
      "a": "Small agencies billing net-30 typically land at 40-55 days once late payers are included; enterprise-heavy shops on net-60 often sit at 70-90. If your DSO is more than 20 days past your stated terms, the problem is collections process, not client behaviour."
    },
    {
      "q": "What actually lowers DSO?",
      "a": "Deposits and milestone billing, invoicing on the day work completes rather than month-end, automated reminders at day 3 past due, and a named owner for collections. Discounting for early payment works but is expensive — 2/10 net 30 is roughly a 36% annualised rate."
    },
    {
      "q": "Is trapped cash a real loss?",
      "a": "It's a real cost, not a loss — you'll eventually collect it. The cost is what that capital would have earned or what you pay to borrow against it while you wait, which is exactly what the carrying-cost line shows."
    },
    {
      "q": "How does DSO interact with growth?",
      "a": "Badly. Growing revenue with a high DSO consumes cash faster than it generates it, which is how profitable agencies run out of money. Fix DSO before a growth push, not during one."
    }
  ],
  "related": [
    "https://www.revenuelab.fyi/toolbox/agency-runway-months",
    "https://www.revenuelab.fyi/toolbox/agency-client-concentration",
    "https://www.revenuelab.fyi/toolbox/agency-deposit-structure"
  ],
  "license": "CC-BY-4.0",
  "citation": "RevenueLab — Days Sales Outstanding Cost Calculator (https://www.revenuelab.fyi/toolbox/agency-dso-impact)"
}