Cash Flow and Collections Metrics for Small Business
How days sales outstanding, average order value, conversion rate, and cost of goods sold combine to reveal where cash is getting stuck.
Revenue on paper and cash in the bank are two different things. These four metrics track the gap between them.
Days Sales Outstanding: how long cash is tied up
DSO measures the average number of days it takes to collect payment after a sale. With $200,000 in accounts receivable and $2,400,000 in annual credit sales, DSO works out to (200,000 / 2,400,000) × 365 ≈ 30.4 days. A rising DSO trend, even with flat sales, often signals collections are slipping or customers are stretching payment terms.
Average order value: the revenue-per-transaction lens
Average order value divides total revenue by number of orders. $50,000 in revenue across 400 orders gives an AOV of $125. Raising AOV (through bundling, upselling, or minimum order incentives) is often cheaper than acquiring more customers to hit the same revenue target.
Conversion rate: turning visitors into orders
Conversion rate divides completed transactions by total visitors or leads. 400 orders from 20,000 site visitors is a 2% conversion rate — a common benchmark range for e-commerce, though it varies enormously by industry and traffic source.
Cost of goods sold: what it actually costs to deliver
COGS captures the direct costs of producing what was sold — materials, direct labor, manufacturing overhead — excluding selling and administrative expenses. If that $50,000 in revenue cost $30,000 in COGS, gross profit is $20,000, a 40% gross margin.
Putting the funnel together
AOV and conversion rate describe how revenue gets generated; DSO and COGS describe how much of it becomes usable cash and profit. A business chasing growth by raising conversion rate while DSO quietly creeps upward can end up cash-poor even as revenue climbs. Check all four with the days sales outstanding calculator, average order value calculator, conversion rate calculator, and cost of goods sold calculator.