Days Sales Outstanding is one of the most closely watched metrics in financial management — and for good reason. A high DSO means cash is sitting in unpaid invoices rather than working for your business. Here are five structured AR strategies that consistently help businesses bring DSO down over time.
1. Credit Assessment at Onboarding
The most effective way to manage collections is to reduce the risk before it starts. Running a basic credit assessment before extending payment terms to new customers helps identify risk early — reducing bad debt and late payment issues down the line.
2. Timely and Accurate Invoice Delivery
Every day an invoice sits undelivered or contains an error is a day added to your DSO. Automating invoice generation and delivery — and ensuring invoices are accurate the first time — removes one of the most common and avoidable causes of payment delays.
3. Early Payment Incentives
Offering a modest early payment discount — typically 1 to 2 percent — can accelerate collections meaningfully. For many businesses, the cost of the discount is offset by improved cash flow and reduced time spent on follow-up.
4. Structured Follow-Up Process
Ad-hoc chasing rarely works consistently. A structured escalation sequence — with defined touchpoints at set intervals after the due date — tends to outperform informal follow-up in both speed and recovery rate.
5. Regular Ageing Report Reviews
Weekly or bi-weekly AR ageing reports ensure that overdue accounts are identified and actioned before they become a problem. Without visibility, AR can quietly slip — and DSO climbs without anyone noticing.
At Obham Outsource, we support small and mid-sized businesses with structured AR management — from invoice delivery to collections follow-up. If your DSO is higher than you would like, let's have a conversation.
This article is for informational purposes only. Results vary based on business type, industry and existing AR processes.