DSO: How to find out how much cash is locked up with your customers

DSO (Days Sales Outstanding) is the average number of days from issuing an invoice to receiving payment, and it measures how long you are extending credit to customers without compensation. You calculate it as total receivables divided by (annual revenue / 365). According to the EU Payment Observatory, the average time to settle B2B invoices in the Czech Republic in 2024 was 62.3 days, the second longest in the EU right after Croatia¹. For a company with revenue of CZK 50 million, shortening DSO by 10 days frees up roughly CZK 1.4 million back into the account, with no bank and no loan. Three quick levers: invoice on the day the work is finished, send reminders three days before the due date, and offer a 2 % early-payment discount for payment within 10 days.

Most business owners estimate that their customers pay in about a month. Then we look at the data – and find 62 days. That difference, 32 extra days, costs a company with revenue of CZK 50 million more than a million crowns a year. Locked up in receivables. With no interest. With no compensation.

DSO: the single number that tells you how long you are extending credit to customers without compensation

DSO (Days Sales Outstanding) is the average number of days from issuing an invoice to receiving payment. The higher it is, the longer your money sits with the customer instead of in your account.

According to the EU Payment Observatory, the average time to settle B2B invoices in the Czech Republic in 2024 was 62.3 days, the second longest in the EU right after Croatia. The figure varies by sector: in construction it tends to be considerably longer, and in IT services and retail shorter.

The formula is simple:

DSO = Total receivables / (Annual revenue / 365)

A company with monthly revenue of CZK 4 million and receivables of CZK 8.2 million: DSO = 61.5 days. Cutting it to 50 days means receivables drop to CZK 6.7 million. The difference – CZK 1.5 million – is capital that returns to the account. With no bank. With no loan.

Where you stand: DSO benchmark by sector

Indicative ranges based on our practice with mid-sized Czech companies; this is not official statistics.

How 5 customers locked up CZK 1.2 million

An e-shop, revenue of CZK 28 million a year. The five largest customers made up 40 % of revenue – but 70 % of late payments.

The change for these five clients: shortening the payment term from 60 to 30 days plus a 2 % discount for payment within 10 days. The result: CZK 1.2 million freed up within 6 weeks. Without a single crown from the bank.

The key finding: the problem was not across the entire customer portfolio. It was in five companies that behaved as if they had unlimited credit – because no one had told them they did.

Three things you can do this week

1. Invoice on the day the work is finished, not “when there is time.”

Every day you delay issuing an invoice is a day you extend credit to the client without compensation. Among the companies we work with, the average delay in issuing an invoice is 4 days. Four extra days – at revenue of CZK 100 million, that is more than a million crowns a year sitting in the system instead of in the account.

2. Send a reminder 3 days BEFORE the due date – not after it.

A simple automated e-mail: “Hello, just a reminder that invoice no. XY is due on Thursday.” Nothing more. Among our clients, this single change reduced the average payment delay by 5 days. Five days × dozens of invoices a month = a measurable shift in DSO without any pressure on the customer relationship.

3. Identify your 5 worst payers – and decide.

Draw up a list of the five clients with the longest DSO. Then ask yourself: are these customers truly profitable once you factor in the cost of financing them? A customer who pays 30 days later than the others costs you the equivalent of 8 – 12 % p.a. on their invoices – a hidden discount you are giving them without knowing it. Changing the terms, shortening the payment period, or introducing an early-payment discount shifts the dynamic – and most customers accept it if they are given a fair offer.

Early-payment discount: why 2 % is cheaper than an overdraft

Offer a 2 % discount for payment within 10 days instead of the standard 30. The maths: 2 % for speeding things up by 20 days corresponds to an annual cost of 36 % p.a.

Compare that with the alternative: an overdraft at 8 – 12 % p.a. plus fees, plus risk, plus the administration involved in collection. The discount is voluntary – a customer who takes it effectively saves you time, risk, and collection costs. A customer who does not take it pays in the standard way. You have nothing to lose.