DSO (Days Sales Outstanding) measures how long it takes for a business to get paid for a good or service. It is an essential metric that enhances cash flow management while enabling B2B companies to accurately gauge their financial health. Accounting automation is effective in establishing a low DSO, which means you get paid fast.
A high DSO, however, crimps cash flow, stunts your company’s growth, and creates a stressful work environment.
The best way to reduce DSO is to ensure your AR (accounts receivable) process is efficient and precise. Implementing accounting automation is one of the most effective ways to achieve this. PYMNTS reports B2B companies handling between 500 and 1,000 invoices per month that use automation have an average DSO of 29 days; those handling the same number of invoices while using little or no automation have an average DSO of 44 days.
This blog lists five ways automating your AR reduces DSO.
1. Create Efficiencies
High DSO isn’t always a direct result of customers neglecting due dates. A muddled, inefficient AR process hurts too.
AR automation streamlines operations, eliminates human error, and seamlessly performs time-consuming manual tasks in minutes. It enables you to generate, customize, and reconcile invoices immediately, expediting the payment process and ensuring you get paid on time, reducing a high DSO and increasing your cash flow.
The faster you can get an accurate invoice to your customers, the faster you get paid.
2. Multiple Payment Options
A heavy reliance on check acceptance leaves you and your customers vulnerable to fraud and drives up DSO. It can take weeks for a check to arrive by mail, especially with weekends and national holidays factored in, and even more time to clear.
A surefire way to reduce or eliminate check usage is to provide multiple payment options. AR automation platforms empower your customers to set up and manage secure digital wallets, enabling them to make payments via ACH (Automated Clearing House) and credit cards by simply clicking a button. Some platforms provide a Pay Now feature that allows payments to be made through a link in the invoice email.
AR automation offers you the opportunity to set up AutoPay and simply draft recurring payments from your customer’s digital wallet. That way, you’ll always get paid on time and your customers will appreciate having one less chore to complete.
3. Real-time Data
What is your company’s DSO? You may know it today. But do you have the manpower, tools, and time to check it whenever you want? And are you sure it’s accurate?
The right AR automation platform not only calculates DSO for you but also presents it in real time on a clean, easily navigable dashboard that puts crucial information right at your fingertips. You don’t have to waste time digging up old invoices or double-checking your math – it’s all done for you. And it’s all done right.
AR automation also provides other data such as AR aging and past-due balances while providing real-time updates on which invoices have been paid or are awaiting payment. This information is precise and enables you to gauge DSO while also pointing out any pain points you can remedy to improve it.
4. Enhanced Customer Collaboration
More than 60% of late payments occur because an invoice was incorrect. Poor communication compounds these mistakes, especially if your customer is looking for an answer but can’t get hold of you.
The best AR automation platforms provide real-time communication tools and chat features, taking ineffective chatbots and outsourced answering services out of the equation and enabling you to answer any questions or resolve any discrepancies immediately. That way, customers have the accurate information required to make prompt payments that reduce your DSO and strengthen cash flow.
AR automation sends out payment reminders and alerts, freeing you and your staff from writing emails or making phone calls that can get uncomfortable. You know your customers best, which is why AR automation enables you to customize how and when these reminders are sent, to whom, and how often. It’s your business. The right AR automation platform simply helps you manage it more effectively.
Bill360 offers AR automation you won’t find anywhere else with an exclusive suite of features like up-to-the-minute DSO monitoring and real-time communication tools. That is how we help B2B companies like yours reduce DSO by nearly 90%.
Bill360 enables you to decrease DSO, increase cash flow, and put your business on the fast track to long-term profitability.
