3 Surefire Strategies To Lower DSO & Support the Office the CFO

Today’s businesses are facing some stiff economic headwinds, with high interest and inflation rates, a challenging labor market, and an unpredictable global supply chain among the most pressing issues.

What it all means for our collective economic future is for economists and pundits to debate. For the Office of the CFO and other accounts receivable (AR) leaders, however, it boils down to one thing: getting money into the bank as fast as possible.

How can AR departments support the Office of the CFO by reducing DSO and collecting cash faster? Let’s explore.

Understanding DSO’s importance

Days sales outstanding, or DSO, is a measure of how long it takes your business to convert receivables into cash using the equation: AR balance/credit sales x number of days in the period.

DSO is often seen as a “guiding light” for today’s Office of the CFO because, when too high, it can deny a business the cash it needs in order to:

• Purchase raw materials & goods
• Fund manufacturing & distribution
• Invest in sales & marketing
• Pay for salaries & benefits for employees
• Drive innovation & product development

3 surefire strategies to lower DSO

Fortunately, achieving transformational DSO improvements does not require AR teams to abandon the people, processes and guiding principles that’ve made them successful up to this point.

Automated AR solutions can be up and running within weeks, seamlessly work alongside existing systems and finance applications, and be used to advance these five surefire strategies for reducing DSO:

1. Let customers pay how they want.

   As more and more businesses convert from paper checks to digital payments — and consequently, AR teams deal with an influx of virtual card/emailed payments — optimization of this process is a key component to reducing DSO and accelerating cashflow.

   Automated AR solutions bridge the gap between buyer preferences and supplier headaches by extracting virtual payment instructions from email and AP platforms, automatically authorizing and processing payments, and consolidating and delivering remittance info directly into the ERP.

2. Solve the "portal problem."

   Increasing requirements to submit invoices directly into customers’ AP systems means AR staff can spend hours logging in to multiple portals to get invoices out.

   Technologies within AR automation solutions (e.g., RPA, EDI and API) can eliminate the manual task of logging in and deliver invoices automatically — whether it’s a network portal or customer portal.

   From the portal interface, customers can then perform several intuitive and time-saving actions, including viewing and paying invoices, requesting a payment plan, signing up for auto-payments, and more.

3. Eliminate low-value, manual tasks associated with:

   Invoice delivery — E-invoicing simplifies the processing and delivery of invoices by extracting invoice data from the biller’s ERP application and sending it via the customer’s preferred delivery channel. Not only can invoices be archived, tracked and reconciled electronically, billers can schedule e-invoices to be delivered when a customer is most likely to respond.

   Sending payment reminders — Automated payment reminders ensure that customers know what is due and when, while providing them a link for payment (without eating up your staff’s time). What’s more, these payment reminders ensure that every customer gets alerted, not just the biggest customers.

   ​Cash application — Manual cash application bogs down DSO and forces AR staff to chase down disconnected invoice and remittance information. Thanks to AI-enabled cash application tools, AR teams can streamline multi-currency cash allocation and reconciliation while providing financial decision-makers with a real-time view of cash and debits.

Want to learn more?

Watch the on-demand webinar, 5 Ways AR Automation Makes It Easier To Get Paid Fast, to discover how automating your AR process can lead to lower DSO, happier team members and an improved CX.