Tips for Reducing DSO

Days Sales Outstanding (DSO) is a measure of how quickly a company collects payment for its receivables. The most successful enterprises make reducing DSO a priority. Why? Because your company’s overall efficiency and liquidity are directly tied to the speed at which it converts orders and invoices into available cash.

Benefits of Reducing DSO

AR departments that streamline payment processes create a foundation for improved business performance. By taking the proper steps in reducing DSO, your business can benefit from:

  • Stronger Cash Flow – Faster payment cycles means healthier and more predictable cash flow.
  • More Effectively Managed Working Capital – Cash flow improvement stabilizes and increases working capital that can be used for short-term investment and business opportunities.
  • Lowered Risks in Accounts Receivables – Lower DSO mitigates the risk of payment delays and enhances your organization’s financial forecasting capabilities.

Reducing DSO to Improve Business

In Sept. 2014, Direct Insite and the Blue Hill Research Group conducted a study that identified the challenges, goals and plans of organizations to better handle their collection process on accounts receivable. Among the 42 end-user organizations and 12 banks that participated in the survey, the third most commonly reported goal was reducing DSO—just behind reducing receivables processing times and increasing adoption of electronic invoicing.

Some of the strategies to begin reducing DSO include:

  • Timely and Accurate Invoicing – Provide timely and clear invoices immediately upon providing services or goods. Invoices that are delivered late or contain errors caused by manual keying routines can increase invoice disputes and create payment delays.
  • Electronic Payment Capabilities – Online payment processing and electronic invoicing can reduce costly paper and manual billing costs by more than 50 percent. AR automation can also reduce the invoicing process by several days and allow companies to collect on accounts receivable faster. In addition to being more accurate and providing a higher level of security, electronic capabilities and invoice presentment enables customers to access their invoices at any time.
  • Financial Incentives – Discounts can incentivize customers to pay invoices more quickly. By offering a percentage discount for reduced payment turnaround times, you can significantly decrease average DSO and improve cash flow. In addition, customers may be more likely to adopt early payment habits if they know that they will receive a discount for doing so.
  • Streamlined Dispute Resolution – Disputed invoices are unavoidable for any company that provides invoices to customers. But since disputes can slow down payment cycles, it’s important to establish procedures to satisfactorily and quickly resolve disputes.

Direct Insite supports corporations and enterprises looking to take their business to the next level. By providing the proper tools to help improve your company’s efforts in reducing DSO, Direct Insite can help you achieve better efficiency and cash flow.

Ready to Take the Next Step in Reducing DSO?

When your company is ready to take the next step in reducing DSO, call us today at (610) 212-2487, or email us at sales@directinsite.com for a private demo.

 

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