What are the best accounts receivable solutions for improving DSO?

Days Sales Outstanding (DSO) is one of the most popular key performance indicators (KPIs) for any business. It measures the average number of days it takes to collect payment after a sale. A high DSO can signal inefficiencies in your accounts receivable (AR) processes and put a severe strain on your corporate cash flow.

AR automation solutions are pivotal for enhancing Days Sales Outstanding (DSO). Companies that fully embrace AR solutions achieve substantial DSO reductions. A Vanson Bourne study involving 500 finance leaders revealed that organizations with high levels of automation in their AR processes saw an average 41% reduction in DSO. Even those with low automation still reported a notable 29% improvement in DSO. Here at Billtrust, we witness our clients achieve up to a 50% reduction in DSO with AR solutions.

How does that translate into business value? Here’s a tangible example: For a company with $100M in annual revenue and a 60-day DSO, a 41% reduction frees up approximately $6.7M in working capital.

Working capital optimization is the #1 priority for CFOs now, according to the Hackett Group’s research.

AI in accounts receivable is critical. Integrating AI directly into AR solutions can drive DSO down even further. A Wakefield Study on AI in accounts receivable confirms this, revealing that 75% of AR teams leveraging AI saw their DSO drop by 6 or more days, and 14% achieved a reduction of 11 or more days.

Let’s explore the core influencers of DSO, the operational fundamentals you must address to improve it, and finally, how the right technology and AR solutions platform can help you scale those best practices for your enterprise or mid-market company.

AI in accounts receivable is critical. Integrating AI directly into AR solutions can drive DSO down even further. A Wakefield Study on AI in accounts receivable confirms this, revealing that 75% of AR teams leveraging AI saw their DSO drop by 6 or more days, and 14% achieved a reduction of 11 or more days.

Let’s explore the core influencers of DSO, the operational fundamentals you must address to improve it, and finally, how the right technology and AR solutions platform can help you scale those best practices for your enterprise or mid-market company.

What are The Four Key Influencers of DSO and How Do I Measure Each One?

To improve DSO, it’s crucial to understand the four main factors that influence it:

1. Credit Terms and Risk Tolerance

The payment terms you offer and your policies for managing credit risk directly set the baseline for how quickly you can expect payment.

KPIs to Track:

• Bad Debt Ratio
• Collection Effectiveness Index (CEI)
• Credit Line Management
• Approval Times for credit applications

Real-World Example
A company that enforces strict Net 30 terms for every customer might have a lower DSO but could alienate larger clients who expect Net 60. Conversely, a business that doesn’t properly assess credit risk and offers Net 90 terms to new, unvetted customers will likely see a much higher DSO and increased bad debt.

DSO measures how long it takes to collect payment after a sale is made. This metric reflects both the health of cash flow and the efficiency of collections. What is the industry benchmark for DSO? It varies widely among different industries; however, AR teams should aim for a target result of ≤1.5 X their payment terms.

2. Communications and Customer Experience

How clearly you communicate with customers about their outstanding balances and the ease of their overall payment experience can either speed up or slow down collections.

KPIs to Track

• Average response time to customer inquiries
• Dispute resolution time
• Customer satisfaction scores related to billing

Real-World Example
Consider a customer who receives a paper invoice 10 days after a purchase with no clear instructions on how to pay online. They might set it aside and forget about it. Compare this to a customer who receives an email on the same day the service is rendered. It includes the invoice attached and a direct link to a payment portal that doesn’t require them to have a login and password, but rather a “check out as a guest” option. The second scenario drastically reduces DSO and encourages immediate payment.

3. Payment Method Diversity

The variety of payment methods you accept and how simple they are for your customers to use play a major role in facilitating quick remittances. Consider whether your organization accepts credit cards and virtual cards, ACH, and other modalities.

KPIs to Track

• Payment mix (% ACH vs. check vs. card)
• Payment abandonment rate at checkout
• Virtual card acceptance and payment rates

Real-World Example
If a business only accepts checks by mail, they are adding 5-7 days of transit time and manual processing to their collections cycle. A customer who wants to pay immediately by credit card can’t. By offering multiple options—like ACH, credit card, and virtual card payments through an online portal—you empower customers to pay using the method that is fastest and most convenient for them. This is why  automated collections software is helpful, it offers a customer-facing payments portal.

4. Internal Process Efficiency

How quickly and accurately you apply payments to the correct invoices is a critical final step that impacts your official DSO outcomes.

KPIs to Track

• Cash application match rates (percentage of payments matched without human intervention)
• Cash application time (hours per $100K processed)
• Unapplied cash as a percentage of total receivables

Real-World Example
Imagine your company receives a large ACH payment from a major client, but it arrives without remittance information. If your AR team spends the next three days manually trying to match the lump sum to dozens of open invoices, your DSO will remain artificially high for those days, even though the cash is already in your bank account.

It’s essential to understand that DSO is influenced by a variety of practices. Improving DSO means addressing a variety of AR activities. 

Best Practices for Improving DSO

The best AR strategies track a constellation of interconnected KPIs that together paint a complete picture of receivables health. Improving DSO requires monitoring and optimizing all these metrics simultaneously.

Get our eBook: The 20 Best KPIs for Accounts Receivable

How Can I Fix the Root Causes of High DSO?

Throwing an AR automation platform at a broken process just automates the dysfunction. True improvement comes from fixing the fundamentals first. An AR solutions platform can help force AR teams to rethink and optimize these fundamentals. The best vendors will partner with you on end-to-end process optimization, not just hand you software and expect you to figure it all out.

Upstream Fundamentals: Before the Invoice is Sent

• Get the invoice right the first time: Most DSO problems start here. A single disputed line item in an invoice due to a wrong PO number or incorrect pricing can hold up a massive payment for weeks. Focus on upstream order accuracy and sending the invoice in the right format, as this increases accuracy and acceptability.
• Make smart credit decisions at the front door: Don’t extend generous terms to customers with a history of late payments. Leverage AI and automation to segment customers by payment behavior and adjust credit policies accordingly. Smart credit allocations can reduce the chances of bad debt.

Operational Excellence: Executing the Core AR Process

• Accelerate invoice delivery: Many companies take days to send an invoice after a product has shipped. Best-in-class teams, however, invoice within 24 hours. Every day you delay sending the invoice is another day you wait for payment and another day added to your DSO. Global eInvoicing compliance can also complicate matters, so make sure your AR software is designed to handle the unique needs of electronic invoices sent to many different countries.
• Make the buyer’s payment experience frictionless: The goal is to eliminate any barrier to payment. This means offering a self-service customer portal with one-click payment options that make transactions simple by accepting all the modern payment methods your customers want to use. If your enterprise buyers expect their invoices to be uploaded to their AP portals, look for a solution that can accommodate that for you. Reformatting invoices for every AP portal shouldn’t be a burden your AR team.
• Implement strategic collections strategies: Don’t wait until an invoice is 30 days past due to follow up with a buyer. A strategic process involves a friendly reminder before the due date, an automated email for example on Day 1 overdue, and a personal call for high-value accounts. Automated collections software can help with this.

Explore Billtrust’s groundbreaking new collections automation software that helps collections move 10x faster.

What are the Key Features of a Top-Tier AR Solution for DSO Reduction?

To effectively reduce DSO, AR solutions should provide a comprehensive set of features that automate and optimize the entire order-to-cash cycle. When evaluating platforms that reduce DSO, look for these core capabilities:

A Checklist of Features to Look For

• Automated Invoice Generation & Fast Invoice Delivery: Delays or errors in invoicing immediately extend the payment timeline. Automation ensures invoices are sent instantly and accurately through the customer’s preferred channel (like email or an AP portal).
• Automated Reminders & Personalized Workflows: Advanced solutions now incorporate agentic AI, which can help personalize outreach strategies based on customer payment behaviors. This reduces dependence on manual follow-ups and ensures timely reminders are sent for upcoming and overdue payments, significantly reducing late payments.
• AI-Powered Payment-to-Invoice Matching: Manually matching payments to open invoices is slow and error-prone. AI automates this process with high accuracy, ensuring cash is posted quickly and DSO is calculated correctly. Look for confidence-based matching powered by machine learning, which learns the unique remittance patterns of your customers over time, reducing the number of exceptions needing manual work.
• Credit & Risk Management: Proactively assessing customer creditworthiness and monitoring risk helps you set appropriate terms and prevent bad debt from happening in the first place. AI can help you recommend dynamic adjustments to credit lines based on credit scores and payment patterns.
• Targeted, AI Approaches to Collections: AI should be used to automatically push the highest-risk accounts to the top of the work queue. It also makes dunning smart and treats collections as the CRM of AR, with personalized machine-generated emails that include contextual information and related attachments. See how agentic AI gives collectors a virtual assistant for their email inboxes.
• Seamless Integrations including ERP: Deep integration with your ERP(s), accounting systems, and payment or invoicing platforms is critical to ensure data consistency, a unified workflow across your financial tech stack, and reduced reconciliation delays. Fractured data and processes compound complexity.
• Real-Time Analytics & Dashboards: Actionable and predictive insights into aging reports, customer payment trends, and cash flow forecasts help you prioritize collection efforts, make data-driven decisions, and stop DSO creep. Learn how Kinepolis drove down DSO by 13 days by using collections automation.
• Industry Benchmarking: External data is equally important to internal data. Leading platforms will help you compare your AR team’s performance to your peers to gauge if your AR process is firing on all cylinders.
• Customer Self-Service Portal: When customers can easily view invoices, check their account status, and make payments online 24/7 (including autopay), friction is removed and collections are accelerated.
• Flexible Payment Options: Supporting a wide range of payment methods (ACH, credit/virtual card, bank transfer) makes it more convenient for customers to pay you promptly.
• Granular and Customized Payment Policies: This allows you to align your payment acceptance rules to specific buyer groups. Such as applying surcharges where compliant or offering discounts for early payments to specific customer segments. Without this feature set, you’re left with nothing but a blanket approach.
• Integrated Dispute Management: Disputes are a major cause of payment delays. An integrated dispute resolution system allows you to track, manage, and resolve disputes faster thanks to centralized data management and clear visibility for all AR functions.

See how Daylight Transport cut its DSO by 15%, bringing it down to the 29–30 day range

How do I Start the AR Software Evaluation Process?

A comprehensive feature checklist (like the one above) is essential for shortlisting AR automation software providers. It confirms what the platform can do. However, reducing DSO and transforming your AR process also depends on the partner you choose.

A vendor simply sells you software. A partner invests in your success. Once you’ve used the checklist to confirm the must-have features – like automated invoicing, AI-powered cash matching, or a customer self-service portal – it’s time to evaluate the provider’s service quality.

Step 1. Start with Self-Assessment

Before you shop the market, map your current AR process and identify where your biggest needs lie.

Assessment Questions

• What is your current DSO, and how does it compare to your industry benchmark?
• Which AR processes are most manual or error-prone?
• Where are the biggest bottlenecks in your order-to-cash workflow?
  • Manual invoice creation
  • Inefficient collections follow-up and tracking
  • Slow cash application
  • High invoice and payment dispute rates
• What are your top three KPIs that need improvement?
• Where can automation drive the most immediate impact?

Action: Based on your needs, create a prioritized list of “must-haves” vs. “nice-to-haves.”

Step 2. Match Solution Capabilities to Your Scale and Complexity

Not all AR platforms are built for the same scale. Consider your invoice volume, geographic business reach, number of customers, complexity of payment terms, and growth trajectory.

Evaluation Criteria

• Invoice Volume: Can the platform handle your current volume and potential growth?
• Customer Count: Does it scale efficiently across thousands of customers?
• Complexity: Do you have complex payment terms, multi-entity structures, or cross-border transactions?
• Geography: Do you need multi-currency, multilingual, and international compliance support?
• Integration Needs: How many systems need to connect (ERP, CRM, payment gateways, banks)?

What to Check

• Can the platform scale across invoices, geographies, and currencies?
• Does the pricing model fit your growth trajectory (per user, per transaction, flat license)?
• If you’re dealing with complex order-to-cash loops, you’ll need robust, enterprise-grade AR software—not a lightweight solution designed for small businesses

Step 3. Evaluate Technology Fit and Data Visibility

Integration is non-negotiable. The best AR software connects seamlessly with your ERP, accounting systems, payment gateways, and banks. A lack of integration creates new data silos and inefficiencies that will negate your DSO improvements.

What to Look For

• ERP Integration Depth: Are the ERP connectors plug-and-play or custom-built? How often does data sync? Is it bi-directional?
• Pre-Built Connectors: Does the vendor have strong, out-of-the-box integrations for major ERPs (SAP, Oracle NetSuite, etc.)?
• Analytics & Reporting: What KPIs and dashboards are available out of the box? Can you customize them?
• Data Security: What certifications does the vendor hold (SOC 2, ISO 27001)? How is sensitive financial data protected?
• API Access: Can you build custom integrations if needed?

Red Flags

• Vendor says “we can integrate with anything” but has no proven connectors for your ERP
• Implementation team suggests manual data exports/imports as a workaround
• No visibility into data sync status or error handling

Read the Pymnts.com Article: Responsible AI Starts With Data Governance

Step 4. Consider the Customer Experience

Your AR process is part of your customer experience. A clunky payment process frustrates customers and slows payment. A self-service portal, flexible payment options, and transparent dispute resolution tools make it easier for customers to pay you faster and improve their perception of your brand.

What to Look For

• Portal Usability: Is the customer self-service portal intuitive? Would your customers actually use it?
• Payment Flexibility: Can customers save payment methods? Set up autopay? Pay multiple invoices at once?
• Dispute Management: Can customers submit disputes or inquiries directly through the portal?
• Branding: Can you customize the portal to match your brand?

Step 5. Don’t Underestimate Change Management

Even the best technology will fail without team buy-in. New AI-driven workflows may reshape how your AR team operates. Automation will augment their expertise, not replace it. But they need to understand this.

What to Check

• What training and onboarding resources does the vendor provide?
• Is there live training, recorded sessions, documentation, and ongoing education?
• How long is the typical implementation timeline?
• Will you have a dedicated Customer Success Manager (CSM) or just a generic support ticket system?
• How will they support your change management efforts during rollout?

Beyond the Feature List: How Should I Evaluate the Partner?

Once you’ve confirmed that a vendor meets your functional needs, the next step is to evaluate who you’re buying from. A vendor sells software; a partner invests in your success.

1. Deep Integration & Implementation Expertise

A vendor’s sales team will always say “yes, we integrate.” A true partner will prove it.

Go beyond the checkbox. Don’t just ask if they integrate with your ERP. Ask how. Is it a fragile, custom-built point-to-point connection that will break with every ERP update? Or is it a robust application with a proven track record? If you have your own home-built solution, will your partner help you build a custom integration?

Probe their process. Ask for a detailed implementation plan. How do they handle data migration? How do they manage customizations in your ERP? What’s their typical go-live timeline? A poor implementation process will delay your ROI and create new data silos, completely undermining your goal of improving cash flow visibility. Understand the difference between rapid-launch solutions and standard solutions.

2. Proactive Customer Success & Support

Your AR team will live in this platform every day. When a payment from a key customer won’t match or an automated reminder workflow fails, you can’t afford to wait days for a support ticket.

Test their support. Ask about their support model. Is it a generic help desk, or will you have a dedicated Customer Success Manager (CSM)? What are the support hours and SLAs? Can you escalate critical issues quickly?

Look for proactivity. Does their team just fix problems when you report them, or do they proactively monitor your key metrics (like DSO, dispute resolution time, and portal adoption) and suggest improvements on a regular basis? A partner helps you optimize, not just operate.

See why clients call Billtrust their trusted partner

3. A Vision for the Future: AI & Scalability

Accounts receivableis changing fast. The AI and automation features that are cutting-edge today will be standard tomorrow. Remember: You’re investing in a platform that needs to help lead your innovation.

Challenge their product roadmap. Are they truly investing in next-generation technology like agentic AI for collections, predictive risk management and autonomous cash application? Or are they just maintaining an old system with incremental updates? Make sure you understand how the provider is delivering AI in accounts receivable.

Connect your vision to your scalability. How will their system support you as you enter new geographies (requiring new payment methods, compliance)? What happens when you double your invoice volume or add new business units? Can the platform grow with you without requiring a painful migration in the future?

Red flags

• Product roadmap is vague or hasn’t been updated recently
• No clear AI strategy or “AI” is just marketing buzzwords
• Current customers report that requested features never get built

See how Generative AI and Agentic AI work for AR teams.

4. Proven Industry Expertise

Your business has unique challenges. The right partner understands your industry’s unique workflows, payment behaviors, and challenges.

Ask for specific, relevant case studies from companies in your industry, of your size.

Listen to their language. When you describe your dispute management or credit risk process, do they listen and learn, or do they immediately share how they’ve solved that exact problem for a similar company? True expertise shows in the details, and in how well they listen to yours.

A Unified, AI-Based AR Solution Helps You Scale Your Fundamentals

While fixing your internal processes is the critical first step, technology is what allows you to execute those fundamentals consistently and at scale. A truly effective strategy for reducing DSO involves combining a solid operational foundation with a unified technology platform.

Point solutions create disconnected workflows, data silos, and integration headaches. A unified AR platform integrates all critical AR functions – invoicing, payments, cash application, collections, and credit management – into a single, intelligent system. This helps you enhance your core processes while also ensuring invoice accuracy, automating strategic dunning, and offering the frictionless payment experiences your customers expect.

With a holistic platform like Billtrust, every data point along the order-to-cash journey is captured, connected, and displayed in one place. Our platform leverages advanced AI and deep financial domain expertise, all built on the industry’s largest financial data network. This delivers not just automation but autonomous capabilities that transform your AR processes. Learn more about our AI differentiators and how Billtrust builds AI in accounts receivable.

Instead of just chasing payments, you can proactively manage credit, optimize collections, and provide a superior customer experience – turning your accounts receivable from a cost center into a strategic driver of cash flow and growth. See how Billtrust’s unified AR automation solutions give you tools to improve DSO and free up working capital. Talk to our experts today.