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How To Reduce DSO?

What are the best practices for reducing Days Sales Outstanding (DSO)?


David OBrien
Title: Treasury Consultant
Company: EE Treasury
(Treasury Consultant, EE Treasury) |

Dear Accounting Manager:

Companies reduce DSO by:
*Ensure that customer contracts are DSO friendly
*Understand the billing and collection process
*Seek out and eliminate DSO bad elements in the contract billing and collection process
*Move to electronic billing
*Are Past Dues the result of customer unwillingness to pay OR the result of operational issues: invoice gets to customer late, consistent invoice errors

The list goes on and on.

David L. O'Brien, CTP

Sarah Jackson
Title: Associate Editor
Company: Proformative
(Associate Editor, Proformative) |

Along the lines of what David said, identifying the specific areas that adversely affect DSO is key.

Take a look at this free white paper, especially the most informative part... bottom of page four. It gives five key areas to look at more closely to reduce DSO:

"Invoice-to-Cash Best Practices Study: A Business Perspective"

Best... Sarah

Laura Smith
Title: Vice President, Global Distribution
Company: Discovery Communications
(Vice President, Global Distribution , Discovery Communications ) |

Hi David,

I would appreciate receiving your presentation on how companies can reduce DSO. Will you please send it to me?


Karl Morgan
Title: None
Company: None
(None, None) |

In my experience, DSO increases are driven by a few customers. It is best to have your collection staff work closely with them to understand what is driving the slippage. A close personal relationship can help cuts a few days off the delinquency.

There will always be those customers who have their own terms. Large retailers will often force their suppliers to comply with their terms. There is not much that can be done there.

Finally, have your sales team work with their customers to find out how to get things moving.

scott graves
Title: CFO
Company: Armstrong Teasdale LLC
(CFO, Armstrong Teasdale LLC) |

You should contact David to get further details from him about his "DSO Bad elements in the...process". Eliminate the reasons for the customer to pay late. This involves cleaning up your internal process to ensure that the customer gets all of the paperwork required on a timely basis and that the paperwork is easy to understand and clearly identifies the due date.
Then, ensure that your collections department is diligent in pre-calling customers to ensure that the invoice was received and is set up in their payable system to be paid by the due date. If there are issues, those can be and should be resolved prior to the due date.

Topic Expert
Patrick Dunne
Title: Chief Financial Officer
Company: Milk Source
(Chief Financial Officer, Milk Source) |

1. Invoice timely. Hopefully you invoice as soon as product is shipped or services are rendered.
2. Ensure operationally that invoices are accurate and they display everything a customer needs to pay.
3. Follow up on customers to make sure they have invoice before they are due
4. Follow up with customer as soon as past due and get commitment on payment
5. Continual reporting and follow up on these customers.
6. Review aging repeatedly and assign follow up actions
7. Document all correspondence/communications with customer

Title: CFO
Company: C-Suite Services
LinkedIn Profile
(CFO, C-Suite Services) |

One thing that has not been listed is the close coordination with the Sales staff. Especially when commissions are based on collection, sales staff has a vested interest to keep DSO short.

Oooops...Karl said it already!

Ernie Humphrey CTP
Title: VP, Thought Leadership
Company: Stampli
LinkedIn Profile
(VP, Thought Leadership, Stampli) |

There is a complimentary Proformative webinar on this very topic this Wednesday, November 12 at 11:00 AM PT (2:00 PM ET), "Getting Paid: 5 Steps to Improving Collections & Cash Flow". ( ).

Lyle Newkirk
Title: CFO
Company: Corrigo Incorporated
(CFO, Corrigo Incorporated) |

Also look at your unbilled AR which should be a component of the DSO calculation. You may be dragging down your DSO by overly aggressive revenue recognition with questionable items in unbilled AR status.

Kajoy Gumisiriza
Title: Manager
Company: Self
(Manager, Self) |

In my experience, there is a lot to do with the relationships we maintain with our customers...contracts may be in place, but there is no guarantee that they will be honored by the customers.... we therefore need to keep a close relationship with them, so that in case of delays, we can easily find out why, and rectify the situation


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