- Make A Payment (866) 558-3328
- Client Portal
- Consumer Support
Providing Creative Solutions to Common Problems
Providing Creative Solutions to Common Problems
DSO represents the average number of days it takes your business to collect payment after issuing an invoice. When DSO climbs too high, your working capital gets trapped in unpaid receivables. You’ve delivered the goods or completed the service, but the cash you need for payroll, inventory, or expansion sits locked in customer accounts.
For B2B companies, high DSO creates a domino effect. You can’t pay your own suppliers on time, you miss growth opportunities, and you may even need to take on expensive short-term financing just to cover operational costs. The formula is straightforward:
Here’s how you can calculate DSO:
DSO = (Average Accounts Receivable ÷ Net Credit Sales) × Number of Days
Tracking DSO monthly and comparing it against industry benchmarks tells you whether your collections process is performing or needs immediate attention. Most industries aim for a DSO between 30 and 60 days, but the right target depends on your payment terms and customer base.
|
Southwest Recovery Services: Get Your Money Back 20+ Years Experience | Texas-Based | Contingency Only – You Pay When We Collect
Built for Commercial Collections:
The Southwest Recovery Difference: ✓ Contingency only – no upfront costs ✓ Veteran collectors with respectful omnichannel outreach ✓ Priority sectors: trucking, logistics, contractors, oil & gas ✓ Clear reporting on account status and outcomes Trust & Results You Need: Nationally recognized ethical collections agency with 12 offices across six states. Compliance-first approach with no threats or guarantees. |
7 Optimization Strategies to Reduce DSO
Your DSO problems often start before you make the first sale. Extending credit without proper vetting invites slow payments and bad debts. Establish clear credit policies for new customers. These should include credit checks, trade references, and financial statement reviews.
Set credit limits based on documented financial stability rather than optimism about future orders. Standardize your credit application process so that every customer undergoes the same evaluation, eliminating the risk of inconsistent decisions based on relationships or pressure from your sales team.
Every day you delay sending an invoice is another day before payment arrives—so, automate invoice generation immediately after delivery or service completion. Your invoices should clearly display purchase order numbers, itemized descriptions, payment terms, due dates, and multiple payment options.
Confused customers don’t pay quickly. If your invoice requires detective work to match against their purchase order or lacks clear payment instructions, expect delays. The accounts payable department will likely send it back for clarification.
Offer electronic payment options, including Automated Clearing House (ACH) transfers, credit cards, and online payment portals. The easier you make it to pay, the faster customers will process payment.
Sometimes customers can pay faster, but choose not to because there’s no advantage to doing so. A 2% discount for payment within 10 days creates a compelling reason to prioritize your invoice over others sitting in their queue.
Calculate whether the discount makes financial sense for your business. If your standard payment terms are Net 30 and you’re offering 2% for payment within 10 days, you’re essentially paying 2% to access your cash 20 days earlier. Annualized, that’s roughly a 36% cost of capital, but if you’re currently dealing with 60-day actual payment cycles, the improvement in cash flow may justify the expense.
Waiting until invoices hit 60 or 90 days overdue before taking action guarantees high DSO. Develop a systematic collections calendar that starts before the due date:
This cadence keeps your invoices visible and signals that you’re actively tracking payments. Many delayed payments aren’t intentional defaults but simply result from invoices getting buried in busy AP departments. Your proactive contact brings them back to the top of the pile.
Payment disputes extend DSO significantly. A customer who disagrees with the quantities delivered, pricing, or service quality will hold payment while the dispute is resolved. Clear communication prevents these issues.
Confirm order details before delivery, provide proof of delivery or service completion immediately, and make it easy for customers to reach someone who can quickly resolve billing questions. When disputes do arise, address them immediately rather than letting them fester.
Manual accounts receivable processes introduce errors, delays, and inconsistent follow-up. Integrating your order management, invoicing, and collections systems creates seamless data flow and visibility throughout the cash collection cycle.
Modern AR automation platforms track every customer interaction, flag high-risk accounts based on payment patterns, and provide real-time dashboards showing which customers are trending toward delinquency before they actually miss payments.
Technology eliminates the human tendency to avoid uncomfortable collection calls, ensuring automated reminders go out on schedule regardless of whether your staff is busy or on vacation.
Reducing DSO isn’t a one-time project but an ongoing operational priority. Track DSO monthly by customer, sales region, and product line. This segmentation helps identify payment patterns. Use aging reports to identify which customers are trending toward delinquency and prioritize collection efforts on the highest-value accounts.
Review your credit policies quarterly and adjust based on results. If you’re seeing strong payment performance from customers in specific industries, you might safely extend more favorable terms. If other segments show chronic payment issues, tighter credit controls may be necessary.
When internal collection efforts aren’t producing the results you need, partnering with a professional collection agency can dramatically reduce DSO while preserving customer relationships.
At Southwest Recovery Services, we bring over 20 years of commercial debt collection expertise tailored to B2B companies in industries such as trucking, logistics, construction, oil and gas, and wholesale distribution.
We operate exclusively on a contingency basis with no upfront costs or monthly fees. You pay only when we successfully recover funds; our fees typically range from 10% to 25% depending on the age and complexity of the account. This pay-on-success model eliminates financial risk and aligns incentives completely with your recovery goals.
We use AI-guided tracking systems to monitor every account across phone, email, text, and mail, ensuring persistent professional contact without aggressive tactics that damage relationships. With 12 offices across six states, we provide nationwide geographic coverage for collections while maintaining the personalized attention mid-market companies need.
By engaging us early in the collection cycle, before accounts age beyond 90 days, you maximize recovery rates and minimize the impact on DSO. Our respectful, relationship-preserving approach recognizes that today’s delinquent account might be tomorrow’s strong customer once cash flow improves.
Timeline varies based on which strategies you implement and how consistently you execute them. Invoicing improvements and early payment discounts can yield results sooner because they affect new sales immediately.
Credit policy changes and automation projects may take a bit longer to impact DSO fully. The key is consistent execution rather than sporadic efforts that get abandoned when other priorities emerge.
Not all customers deserve the same credit terms. New customers with no track record, customers in financially unstable industries, or those placing large orders relative to their size should face stricter requirements, such as deposits, shorter payment terms, or cash-on-delivery. Reserve your best payment terms for established customers with proven payment histories.
Large customers who pay slowly create a dilemma because you need their business, but can’t afford to have capital tied up in receivables.
Address this directly through negotiation. Consider offering early payment discounts that create financial incentives for faster payment, implementing progress billing for large projects, or requesting partial deposits before beginning work.
Document these conversations and any agreed modifications to payment terms. If a customer refuses to improve payment behavior, factor the extended payment cycle into your pricing to ensure you’re compensated for the working capital you’re providing.
Southwest Recovery Services specializes in commercial B2B debt recovery with over 20 years of experience helping businesses recover overdue accounts and improve cash flow. Here, we operate on a contingency-only basis, meaning you pay nothing upfront and only pay fees of 10% to 25%, depending on your account type and situation, when we successfully recover funds.
With 12 offices across six states and our founder’s daily involvement, we provide both geographic coverage and personalized attention for businesses with $10 million to $100 million in revenue.
*Note: Recovery rates mentioned are for general reference only and not guaranteed. Actual results vary by account and industry. Contact Southwest Recovery Services for a customized quote.
We make it fast and easy to refer past due and delinquent accounts to our professional recovery agents. You decide the range on what you will accept on each case, and you ONLY pay a percentage of what we actually collect to resolve the case. Ready to get started, or want to learn more? Fill out this form and a dedicate account manager will call you to get started.
