What Is DSO? A Beginner’s Guide to Reducing Days Sales Outstanding

Days sales outstanding (DSO) refers to the average number of days it takes a business to collect payment after a sale has been made, and it’s a vital indicator of accounts receivable efficiency. Generally, a DSO of around 45 days is considered standard, though benchmarks vary across industries. When a company’s DSO is high, it signals delays in receiving payments, which can hinder financial flexibility. On the other hand, a low DSO demonstrates efficient collections and quicker access to owed funds, improving working capital.  

High DSO and cash flow constraints cause unnecessary pressure on AR departments, so it’s no surprise that reducing DSO is commonly cited as a top priority for AR teams. Despite this being a common goal among suppliers, reducing days sales outstanding and improving cash flow proves to be a challenge across most industries.  

What Causes a High DSO? 

There are two primary reasons why your company may be experiencing a high DSO – late payers and inefficient AR processes. 

If you work in accounts receivable, you probably know late payments all too well. According to a report done by PYMNTS, 68% of CFOs said delays in receiving payments had caused problems for their firms. Late payments burden AR teams with extra manual processes, such as identifying overdue accounts and initiating repeated follow-up to collect funds.  

Highly manual AR processes that require cumbersome data entry, paper invoices, and physical checks often lead to slow cash application. Switching from physical checks to a digital payment process such as ACH or traditional commercial card is a step in the right direction but still comes with challenges like complicated reconciliation processes and the potential for human error. 

Reduce your days sales outstanding (DSO) with Boost  

Boost Intercept, our patented straight-through processing technology can work as a mutually beneficial solution to unlock capital and improve cash flow by increasing DPO for buyers and significantly reducing DSO for suppliers. Straight-through processing ensures payments are seamlessly automated from start to finish, enabling lower DSO and faster access to funds. Here's how this is accomplished: 

Virtual card payments through Boost are automatically deposited to your bank account, meaning near instant access to funds once your customer has processed the payment.  

By accepting virtual cards, buyers can manage their cash flow more flexibly, making them more likely to pay on time and adhere to payment terms. On-time payments mitigate the hassle of following up on overdue invoices. 

Virtual card payments processed through Boost eliminate manual data entry, allowing for a passive payment experience. This allows for reduced risk of human error and can help redeploy labor hours to other AR responsibilities.  

Boost provides detailed reconciliation reporting with full remittance and settlement details at the time of each payment. No matter what AR software you’re using, this reporting is delivered in the format you need to make integration effortless. 

Switching to a digital payment solution removes the question mark surrounding missing check payments and reduces the risk of unexpected payment delays. 

Demonstration of Shared Working Capital Benefit

This solution allows buyers to achieve extended DPO, fostering stronger working relationships between businesses. 

Accepting card doesn’t have to be expensive or cumbersome. Suppliers accepting card payments through Boost enjoy streamlined, automated processes and access to the industry’s lowest all-in rate. This allows for reduced DSO without the high costs often associated with commercial card acceptance. 

Ready to get started? Boost Payment Solutions is here to help. Contact us today to get started.  

Boost Payment Solutions is the global leader in B2B payments with a technology platform that seamlessly serves the needs of today’s commercial trading partners. Our proprietary technology solutions bridge the needs of buyers and suppliers around the world, eliminating friction and delivering process efficiency, payment security, data insights and revenue optimization.  

Boost was founded in 2009 and operates in 45 countries and territories around the world.