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4 Ways to Reduce DSO That No Organisation Is Doing

Updated: 4 days ago

4 best practices to reduce days sales outstanding that almost no business is doing

Struggling with slow-paying customers and a high AR DSO (Accounts Receivable Days Sales Outstanding)? You're not alone. But what if there were simple strategies you could implement to significantly reduce DSO and boost your cash flow?

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This article explores four often-overlooked best practices that leverage technology and smart communication to get you paid faster by creating actionable Invoices:


1. Automate Invoicing for Effortless Payments

Ditch the static invoices and embrace modern invoicing solutions. These empower you to:

  • Get Paid Faster with Embedded Payment Links:  Offer in-invoice payment options like credit card or ACH, eliminating the need for separate portals and accelerating payments.

  • Cater to All Preferences with Multiple Payment Methods:  Provide choices like credit cards, debit cards, bank transfers, and even e-wallets, giving customers flexibility and speeding up the payment process.

  • Reduce Friction for International Customers with Localized Payments:  Allow payments in their local currency, removing exchange rate hurdles and getting you paid quicker.


Combined with a professional design, these features not only improve cash flow by getting you paid faster but also reduce administrative burdens.


2. Create Crystal-Clear Invoices to Reduce Inquiries

Unclear invoices lead to questions, delays, and a higher DSO. Here's how to make your invoices informative:

  • Pre-empt Inquiries with FAQs:  Address common payment terms, methods, and any potential concerns directly within the invoice.

  • Offer Easy Access to Resources:  Include links to product manuals, return policies, and other relevant information, minimizing inquiries.

  • Provide Clear Contact Information:  Make it easy for customers to reach customer support if needed.

By proactively addressing potential issues, you streamline the payment process and reduce DSO.


3. Incentivize Early Payments and Get Paid Faster

Late payment penalties are reactive, but incentivizing early payments is proactive and highly effective in lowering DSO. Consider these strategies:

  • Offer Early Payment Discounts:  Motivate faster payments with a small discount for payments received within a specific timeframe.

  • Implement Tiered Discounts:  Reward larger discounts for quicker payments, significantly impacting your DSO.

  • Integrate Early Payments into Loyalty Programs:  Offer additional benefits for consistent on-time payments, fostering stronger customer relationships while improving cash flow.


These incentives encourage customers to prioritize your invoices, leading to a more predictable cash flow and a healthier financial picture.


4. Streamline Communication for Smoother Payments

Many businesses lack insight into customer payment intentions, making DSO management difficult. Here's how to improve communication:

  • Enable Flagging for Disputed Invoices:  Provide a mechanism for customers to easily highlight potential invoice issues, facilitating prompt resolution and preventing delays that contribute to higher DSO.

  • Allow Customers to Communicate Payment Timeframes:  Let customers indicate their expected payment date, which can help with cash flow forecasting and proactive collection efforts to minimize DSO.


By understanding customer payment behaviour, you can tailor collection efforts and avoid unnecessary penalties, all contributing to a lower DSO and improving cash flow.


Ready to Take Control?

These underutilized strategies can significantly improve your Accounts Receivable Days Sales Outstanding. By leveraging technology, providing clear communication channels, and incentivizing early payments, you can unlock improved cash flow and a healthier financial bottom line.


Join our upcoming webinar to learn more! We'll delve deeper into these strategies and showcase how Pelcro can streamline your invoicing process and get you paid faster!

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