How to Reduce Day Sales Outstanding in Your Business

days sales outstanding 1681036395
days sales outstanding 1681036395

DSO is an abbreviation for Days Sales Outstanding. It can be described as the time take by the customers to make payment. Most business owners extend credit to the customers so that they can sell more products or services. Business owners give a deadline to their customers to make their payments. But, some customers do not make payments at the right time. Ultimately, it leads to problem in management of account receivables. It is imperative to find the accurate accounts receivable problems solutions.  Here, we have described seven steps to reduce DSO and increase your business growth:

  1. Ensure Precise & Timely Billing

If it will take longer to receive the invoices by the customers, then they will take more time to make payments. You should send the invoices to your customers as soon as possible so that they do not make an excuse for delayed payment. We would recommend that you must use the best invoicing and payment software that can automate the invoice generation and sending process as it is one of the best accounts receivable problems solutions. Consider the following checklist to reduce the DSO:
  • Send invoice to the right customer
  • Precisely specify the delivery location and other details
  • List down the right products and services
  • Mention the accurate price of each product or service  
  • Properly mention other details

The electronically generated invoices are correct, and there is less probability of a mistake in these invoices.

  1. Fulfill Customer’s Invoicing Requirements

Another most important thing to consider reducing the DSO is to comply with the invoicing requirements of your customers. Make sure that the invoices contain the valid purchase order numbers so that you get paid. If the purchase order number on the invoice does not match with the actual purchase order of the customer, then you will not get paid. Your customers will refuse to make payment. Make sure that the invoices contain accurate detail. The account software is the best accounts receivable problems solutions because it will automate invoicing process. 

  1. Discount for Early Payment

The best practice to encourage your customers to make payments at the right time is to offer a discount for quick payments. Also, you should charge penalties for late payments. The early payment discount is quite beneficial in attracting customers to make payment before the deadline. The late payment charges trick work well in some regions, but it is really problematic in some areas. Some customers do not ready to pay charges for delayed payments.

  1. Create Transparent Payment Policies

Usually, the major reason for delayed payment is confusion in the payment terms and policies. Therefore, all business owners should create a clear set of terms and policies. Make sure that the payment policies are clearly conveyed to the customers so that they make payments quickly. It will help in reducing the DSO significantly. Also, it is stated that all business owners should sign a written agreement with their customers before extending credit and start delivering their products and services. The accounts receivable portal helps in creating the optimum payment policies. 

  1. Assess the Customers’ History  

You should determine the credit history of the new customer before extending credit to them. It would be very beneficial for you and prevent your company from unpaid invoices. The good credit history of customers clearly indicates that they would make timely payments and won’t let your business suffer. There are different ways to determine the credit history of the customer:  

  • Analyze Credit Reports

You can use any credit information service provider to find out the credit history of your new client. You can check the overall rating given to that customer by the credit information provider.  The receivable solutions can help you to access credit reports. 

  • Know Your Customer

It is important to know the detailed information of your customer. You should verify that you are delivering your products or services to the right person.

  1. Stay Away From Bad Customers

Well, this is one of the most difficult things to do by the business owners. Slow-paying customers are not beneficial for your business. Therefore, you should prevent your business from bad customers. It is imperative to chase those customers who do not make payment before the deadline. Once you have determined these customers, you can stop delivering your products and services to them. The good accounting software will help you to keep track of customers who never make an on-time payment. Therefore, it is recommended to invest in the latest technology accounting software.

  1. Proactively Remind Customers

You have to make sure that you proactively send reminders, emails, and messages to your customers. The reminders will make sure that no customer fails to make payment before the specified deadline

Avatar for Pavan kumar
Proud organizer. Food nerd. Extreme thinker. Evil alcohol expert. Falls down a lot. Freelance music buff. Explorer.


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