Why DSO Reduction Matters
Every day your DSO drops, you free up cash equal to your daily revenue. A $5M/year company reducing DSO from 45 to 30 days frees up ~$205k in working capital.
Tactical DSO Reduction
Invoice Faster: - Send invoices the same day as delivery — not at month end - Use e-invoicing to eliminate postal delay - Automate recurring invoices for subscription billing
Follow Up Systematically: - Day 1 past due: polite reminder email - Day 15 past due: phone follow-up - Day 30 past due: escalate to management contact - Day 45+ past due: collections process or dispute resolution
Incentivize Early Payment: - Offer early payment discounts (see Invoice Discount Calculator) - Add late payment fees (check local regulations first) - Dynamic discounting programs through AP/AR platforms
Credit Policy Changes: - Require deposits or payment in advance for new customers - Shorten payment terms for slow-paying customers - Run credit checks before extending net terms
DSO and Industry Context
A "good" DSO depends heavily on your industry and customer type: - Consumer retail: Near zero (cash/card transactions) - Small B2B: 20–35 days - Enterprise B2B: 45–75 days - Government contracts: 60–120 days
Track your DSO monthly with the A/R Turnover Calculator.