How do I reduce my days sales outstanding?
Invoice the same day you deliver. Every day you delay sending an invoice is a day added to your DSO before the clock even starts. Complete work on Friday but don’t invoice until Wednesday? You’ve already lost five days of collection time for no reason.
Make your payment terms clear and enforce them. Net 30 only works if you actually follow up on day 31. If customers learn you don’t chase payments until they’re 60 or 90 days late, your invoices become low priority. Whatever terms you set, be consistent about enforcing them.
Make it easy to pay you. Accept credit cards, ACH transfers, and online payments. Every barrier gives customers a reason to delay. If they can click a link in the invoice and pay in two minutes, you’ll get paid faster than if they have to find a checkbook and a stamp.
Send reminders before payment is due. A friendly email three days before the due date keeps your invoice top of mind. Most late payments aren’t from customers avoiding you. They’re from busy people who forgot or lost the invoice in their email. Accounts receivable management tools can automate these reminders so nothing slips through.
Follow up immediately when payment is late. Not next week, not when you get around to it. Day one. A polite phone call on day one sends the message that you track receivables and expect payment on time. Waiting weeks to follow up tells customers you’re not paying attention.
Review your accounts receivable aging weekly. Know who owes you money and how long they’ve owed it. The longer an invoice sits unpaid, the less likely it is to get collected at all. Chase the 30-day balances before they become 90-day writeoffs.
Consider requiring deposits or partial payment upfront for new customers or large projects. This reduces your exposure and gets cash in the door before work is complete. Customers who won’t pay a deposit often won’t pay the final invoice either.
If your DSO keeps climbing despite your best efforts, the issue might be how receivables get tracked and followed up. Consistent follow-up requires time that most business owners don’t have while also running day-to-day operations. Working with Macomb, MI bookkeepers who understand your billing cycle can help you build systems that actually get followed and turn outstanding invoices into cash in your account.
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