Widespread Automation Slashes DSO Times by Weeks

accounts receivable

One of the most effective investments firms can make to improve their days sales outstanding (DSO) is implementing technologies that automate invoicing. New tools can help firms better manage the inefficiencies associated with heavy invoicing workloads.

This trend is most notable for those that process the greatest and smallest numbers of invoices, according to the B2B Payments Innovation Readiness Playbook, a PYMNTS and American Express collaboration that analyzes the survey responses of 460 small to large businesses.

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DSO improvement is a key benefit of accounts receivable (AR) automation. Implementing new technologies allows firms to better manage their cash flows by accelerating the time between the delivery of goods or services and the receipt of payment.

Focusing on Reducing Days Sales Outstanding 

This is especially given the financial pressure many Main Street businesses face: 18% of them don’t have available cash on hand.

Read more: New Survey Shows Main Street Businesses Fighting Economic Uncertainty With 3 Key Investments

As a result, AR teams are highly focused on reducing DSO, and PYMNTS research shows that investments in automation technology are a key factor in helping them speed up the cycle.

This research found that businesses handling more than 20,000 invoices per month using automated invoice delivery tools have DSO averages that are up to 23 days shorter than companies that rely on paper-based processes. While firms with little or no automation have an average DSO of 78 days, those with high levels of automation have an average DSO of 55 days.

Even firms with smaller invoice volumes benefit from automation, with those that handle between 500 and 1,000 invoices per month enjoying DSO marks as much as 15 days shorter than those that have invested in few or no technologies. While firms with little or no automation have an average DSO of 44 days, those with high levels have an average DSO of 29 days.

These findings suggest that automation implementation can have a significant positive effect on firms’ cash flow management, especially as virtual work is likely to remain a reality for some companies after the pandemic has passed.

Adapting to Today’s Economic Changes and Challenges 

Automation can help firms to better adapt to economic changes and challenges. For instance, industries that have been slower to implement AR technology have been hit harder by the health crisis than those that have made significant investments in automation — and have, in fact, seen big DSO increases

Finance leaders who championing automated AR processes must determine how to invest in these crucial technologies that can reduce costs, lower DSO averages and make their organizations more resilient to future cash flow challenges.