Managing Days Sales Outstanding (DSO) is one of the toughest challenges for any finance leader. It’s not just about getting invoices paid faster — it’s about doing so without alienating customers who drive your business.
Push too hard, and you risk damaging relationships that took years to build. Move too cautiously, and your cash flow tightens, threatening your company’s ability to innovate and grow.
The key lies in a strategic, data-driven approach that balances firmness with empathy. Here’s a practical roadmap to help you cut down DSO while keeping your customers engaged and satisfied.
7 Ways to Reduce Your Days Sales Outstanding (DSO) While Preserving Customer Relationships
Reducing DSO without damaging customer relationships is achievable when you start with a data-driven strategy. Here’s how to create a balanced approach to accelerate your cash flow while preserving trust and customer loyalty.
1. Get Surgical with Your Data Before Acting
Most companies look at DSO as a single number or rely on generic aging reports divided into 30-, 60-, and 90-day buckets. But this approach misses critical nuances. Instead, you can break down your receivables by customer behavior, sales channel, product type, and even geography.
For example, are certain industries or regions consistently slower to pay? Do specific products or service lines have higher dispute rates? Which customers have a history of partial payments or frequent extensions?
Leverage your ERP or AR system to build custom reports that track payment velocity, dispute frequency, and collection touchpoints. Layer in qualitative data from your sales and customer service teams to understand the “why” behind the numbers.
This granular insight lets you segment your portfolio intelligently and tailor your collection approach to each segment’s realities.
2. Tighten Credit Policies; But Be Transparent and Fair
It’s tempting to tighten credit across the board when DSO creeps up. But blanket changes can backfire. Instead, use what you’ve learned from your data to set smarter limits.
Some customers deserve a little extra flexibility because they’ve always paid, even if it’s a bit late. Others might need stricter terms. Be clear about your expectations from the start. Spell out payment terms in your contracts, and make sure your invoices are easy to understand.
Don’t be afraid to revisit credit limits regularly — not just when you onboard a new client. Circumstances change, and so should your policies. And if a customer hits a rough patch, work with them. Sometimes, offering a short-term payment plan is all it takes to keep things on track — and keep the customer loyal.
3. Automate Collections; But Make Them Personal
Many organizations struggle because their collections outreach is inconsistent. Automate routine reminders to ensure timely follow-ups, but don’t let automation replace personalization.
For instance, trigger emails or texts at strategic intervals — before due date, on due date, and after due date — but tailor the message tone based on customer history. A customer who’s never been late before should get a friendly nudge, not a stern warning. For chronic late payers, it’s fair to be more direct.
Always include a simple way to pay. If your reminder emails have a “Pay Now” button, you’ll see faster results. And if a customer replies to a reminder, make sure a real person gets back to them quickly. That small touch can make all the difference.
4. Prioritize Collections With a Clear System
Not every overdue invoice deserves the same effort. Chasing every late payment with the same intensity is a waste of your team’s time.
Build a scoring system that looks at more than just how overdue a bill is. Factor in the size of the invoice, the customer’s payment history, and how important the relationship is to your business. Maybe a big client is late but always pays eventually; that’s different from a new customer who’s dodging your calls.
Focus your efforts where they’ll have the most impact. Your most skilled collectors should handle the trickiest cases. For smaller, low-risk accounts, let automation do most of the work. This way, you use your resources wisely and avoid burning bridges with your best customers.
5. Proactively Manage Disputes to Avoid Payment Delays
Nothing stalls payment like a dispute. The longer a customer waits for a resolution, the less likely you are to get paid in full.
Make it easy for customers to raise issues. Give them a dedicated contact or an online form. Assign someone to handle disputes quickly and don’t let them drag on. The faster you address a complaint, the faster you get paid.
Be transparent throughout the process. If you’re still investigating, let the customer know. Silence breeds frustration. And if a dispute can’t be solved right away, escalate it to someone who can make a decision. Don’t let small issues snowball into big write-offs.
6. Partner With Reliable Collection Agencies
Sometimes, you need outside help. But sending accounts to collections doesn’t mean you’re done with them. The way you hand off matters.
Segment your accounts before you send them. Some agencies are better with certain types of debt or industries. Give them as much background as possible — not just the amount owed, but the history, the context, and any previous promises.
Set expectations clearly. How do you want your customers treated? What’s your policy on settlements or payment plans? Stay in touch with your agency. The best results come when you treat them as an extension of your team, not just a last resort.
If you want expert help putting these strategies into practice, contact Capital Recovery Systems. We specialize in customized strategies that help finance leaders reduce DSO efficiently and sustainably, without sacrificing valuable customer relationships. Call us today at 470-297-1120 to speak with our experts.
7. Measure What Matters and Adapt Continuously
DSO is important, but it’s not the only number that matters. Watch things like how long it takes to resolve disputes, how often customers keep their payment promises, and how much it costs to collect.
Use dashboards to spot trends early. Maybe a new policy is working — or maybe it’s not. Don’t be afraid to tweak your process. The best teams keep learning and adapting. What worked last year might not work this year.