For businesses handling high volumes of transactions, Days Sales Outstanding (DSO) isn’t just a finance metric—it’s a direct indicator of how efficiently cash moves through your business. A mismanaged DSO can lead to liquidity issues, stalled growth, and reliance on external financing.
Many companies focus on chasing overdue invoices, but the real opportunity lies in proactively managing DSO within the entire order-to-cash process. Here’s how.
DSO Isn’t Just About Collections—It Starts Earlier
Too often, businesses look at DSO as an afterthought, measuring it only when cash flow tightens. But DSO problems usually begin much earlier in the order-to-cash cycle—even before an invoice is sent.
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Common inefficiencies that contribute to high DSO:
- Slow order processing: Manual approvals, incorrect purchase orders, or pricing mismatches delay invoicing.
- Invoice disputes: Errors in invoicing lead to delayed payments and increased reconciliation time.
- Rigid payment options: If customers can only pay through limited channels, they may take longer to settle invoices.
A low DSO isn’t just about chasing payments faster—it’s about optimising each touchpoint in the order-to-cash process to remove bottlenecks before they impact cash flow.
How to Reduce DSO at Every Stage of Order to Cash
1. Improve Order Accuracy with E-Catalogues
Order errors cause delays. When customers have self-service access to an e-Catalogue, they can select pre-approved products, pricing, and specifications, reducing errors that lead to invoice disputes. The result? Faster invoice approvals and quicker payments.
2. Automate Invoice Generation and Distribution
If invoices aren’t sent immediately after an order is fulfilled, payment delays are inevitable. Electronic invoicing (e-invoicing) en automated invoice distribution eliminate manual processing time, ensuring invoices reach customers instantly.
3. Offer Proactive Payment Terms and Discounts
Not all customers respond the same way to due dates. Instead of relying solely on standard payment terms, consider:
- Dynamic discounting for early payments.
- Customisable credit terms based on customer payment behaviour.
- Automated reminders to reduce overdue invoices.
4. Integrate Real-Time Payment and Reconciliation
Waiting days for bank transfers to clear impacts cash flow. By integrating real-time payment solutions with order-to-cash systems, businesses can match payments instantly, therefore reducing reconciliation delays and lowering DSO.
5. Use AI and Analytics to Predict Payment Risks
Finally, past-due payments are predictable if you track patterns. AI-driven analytics can:
- Flag customers with a history of late payments.
- Predict cash flow gaps before they happen.
- Adjust credit terms dynamically based on risk assessment.
Resource: DSO and Cost of Capital Calculator
Conclusie
In conclusion, reducing DSO isn’t about chasing payments faster—it’s about removing friction from the entire order-to-cash process. By focusing on automation, accurate invoicing, flexible payment terms, and predictive insights, businesses can shorten the cash conversion cycle and create a more stable financial foundation.
Need to optimise your order-to-cash process and take control of your DSO? Contact us today to explore our solutions.
About B2BE
B2BE delivers electronic supply chain solutions globally, helping organisations to better manage their supply chain processes, providing greater levels of visibility, auditability and control. We’re driven by a passion for what we do, inspired by innovation, and underpinned by a wealth of knowledge. With over 20+ years of experience, the B2BE teams operate worldwide.
Ga voor meer informatie naar www.b2be.com.