Forty five days DSO sounds reasonable on paper. It does not look alarming. Many wholesale operators see that number and assume they are sitting somewhere in the middle of the pack. Not exceptional, but not in trouble either.
The problem is that DSO in isolation tells you very little. In wholesale, context matters more than the number itself. A 45 day DSO might be healthy in one business and a warning sign in another.
Before deciding whether 45 days is acceptable, you need to unpack what is driving it.
Start With Your Agreed Payment Terms
The first question is simple: what are your standard terms?
If your wholesale business trades on 30 day terms and your DSO is 45, you are effectively financing customers an extra 15 days on average. That gap is not trivial.
If your standard terms are 45 days and your DSO is 45, you may be operating exactly as designed.
But even then, look closer. Is 45 the average because everyone pays on time, or because some customers pay early and others stretch to 60 or 75 days? The composition matters.
Compare DSO against:
- Official payment terms
• Industry benchmarks in your sector
• Your own historical performance over the past 12 to 24 months
Trend direction is often more revealing than the absolute number.
Understand the Cash Impact of Five Extra Days
In wholesale, margins are often tight. A five day shift in DSO can materially change working capital.
For example, a $40 million wholesale business with average monthly sales of $3.3 million might carry roughly $5 million in receivables at 45 days DSO. If DSO creeps to 50 days, receivables could increase by hundreds of thousands of dollars.
That additional capital must come from somewhere:
- Bank overdraft
• Trade finance
• Reduced supplier payment flexibility
• Delayed investment in growth
When people ask whether 45 days is acceptable, what they often mean is whether the business can comfortably fund that level of receivables.
Break Down DSO by Customer Segment
Wholesale debtor books are rarely uniform. A single large retailer might account for a significant portion of exposure. Smaller trade accounts may behave very differently.
Analyse DSO by:
- Top 10 customers
• Customer industry segments
• Payment terms category
• Geographic region
You may discover that your top two customers pay consistently at 60 days, while smaller customers pay within 30. In that case, your 45 day DSO is being distorted by concentration risk.
That scenario requires a different strategy than broad based late payment across the entire book.
Check the Ageing Profile, Not Just DSO
DSO can mask underlying stress. A business may show 45 days DSO while carrying a worrying amount of invoices over 90 days.
Review:
- Percentage of receivables over 30 days overdue
• Percentage over 60 days
• Percentage over 90 days
• Dispute volumes and resolution time
If 45 days is accompanied by a growing tail of 90 plus day debt, it is less acceptable than it appears.
A healthy debtor book at 45 days should show tight clustering around agreed terms, not a long overdue tail.
Factor in Wholesale Specific Realities
Wholesale businesses often deal with:
- Large retailers who dictate terms
• Seasonal buying cycles
• Promotional discounting periods
• Partial shipments and back orders
These dynamics can influence DSO. For instance, seasonal peaks may temporarily inflate receivables. Retailer driven term extensions may push averages upward.
The key is control. Are these conditions planned and priced into your margin, or are they drifting beyond expectation?
Examine Credit Discipline and Follow Up Rhythm
Sometimes 45 days DSO reflects soft credit control rather than commercial necessity.
Ask:
- Are reminders sent consistently before and after due date?
• Are credit limits actively monitored?
• Are broken promise to pay commitments escalated?
• Is there hesitation to place customers on credit hold?
Wholesale businesses often avoid escalation with large customers for fear of losing volume. Over time, this leniency becomes embedded behaviour.
Some organisations implement an accounts receivable platform to bring more structure to reminder cadence and exposure monitoring. The value lies in consistent process, not aggressive collection.
Consider Cost of Capital
The acceptability of 45 days also depends on your funding structure. If interest rates are high and your overdraft is heavily utilised, carrying extra receivables is expensive.
Calculate:
- Weighted average cost of capital applied to receivables
• Interest impact of incremental DSO increases
• Opportunity cost of capital tied up in debtors
When funding costs rise, previously tolerable DSO levels may become unsustainable.
Align DSO With Growth Strategy
High growth wholesale businesses often accept higher DSO temporarily to win market share. That can be a strategic choice.
However, growth driven DSO expansion must be monitored carefully. If DSO rises faster than revenue, working capital strain intensifies.
Track:
- DSO trend versus revenue growth
• Exposure growth in top accounts
• Bad debt write offs over time
If 45 days DSO has remained stable while revenue doubles, that is one story. If DSO has climbed from 32 to 45 during growth, that is another.
Conclusion
Is 45 days DSO acceptable for wholesale businesses? The honest answer is that it depends on terms, funding structure, customer concentration, and risk profile.
Forty five days aligned with 45 day terms, tight ageing distribution, and controlled exposure may be perfectly healthy. Forty five days against 30 day terms with a growing overdue tail is a warning sign.
Wholesale operators need visibility beyond a single metric. Structured monitoring, disciplined follow up, and in some cases support from an accounts receivable platform can help maintain control as scale increases.
The number itself is not the whole story. The behaviour behind it is what determines whether 45 days represents stability or creeping risk.
