Automation is quickly becoming the new normal in 2021. Plans are in place for 70% of businesses to implement automated accounts receivable collections solutions. While much of that push can be attributed to the COVID-19 pandemic, automation isn’t a trend that will go away once the pandemic recedes.
There are countless benefits to automating your A/R collections process—especially when it comes to reducing days sales outstanding (DSO) and improving cash flow.
Why Should You Track Days Sales Outstanding?
Cash flow is important to any business. It’s how much cash you have on hand at any given time to purchase new equipment, invest in new ventures, or pay outstanding debts. A lack of cash flow can cripple your business, which is why it’s essential to track your cash flow.
Days sales outstanding (DSO) is one of the best metrics to track the overall status, or health, of your company’s cash flow. It represents how long it takes customers on average to pay invoices. A low DSO means you’re collecting on invoices quickly, which indicates a healthy cash flow. The lower your DSO, the better for your business.
How to Reduce DSO with Collections Automation?
Tracking and lowering your DSO is the key to optimizing your cash flow. There are several ways automation of collections can reduce your DSO and maintain a healthy cash flow for your business.
Automate Customer Notifications
Manually sifting through emails to ensure clients receive the right messages takes a lot of time. If a correspondence falls through the cracks, customers might not receive invoices or overdue invoices could be left unpaid.
Automating your collections can help your collections team streamline customer communication by automating many of the important customer interactions:
- Notify customers of payment due dates
- Follow-up on late payments
- And uncover any other reason that could lead to a delayed payment
These automation processes save your collections team time and effort, which they can then use to focus on more important projects to boost your cash flow.
A/R collections automation also helps to eliminate human error. It ensures all invoices are sent to the right customer and that no correspondence falls through the cracks. Stay on top of overdue payments automatically to reduce DSO and boost your cash flow.
Complete Visibility Across Your Team
Retracing your steps wastes time and causes errors. If all members of your collections team aren’t on the same page, it could create problems that hurt your cash flow.
Using AR collections software, all your collections data is stored in a single platform. Your employees can access all the information they need to keep up with collections processes:
- Customer communications
- Invoice status
- Payments due
- Payments overdue
Even an employee newly assigned to a collections project can jump right in and see what needs to be done with no backtracking and no missed steps. A more efficient accounts receivable process leads to a lower DSO and increased cash flow.
Since all your information is stored in one platform, it’s simple to track and manage important reporting metrics. You can set filters for ad-hoc reporting and even export your reports to Microsoft Excel spreadsheets to share with team members.
Having instant access to data reporting means you can track and measure metrics like DSO with less time and effort. You won’t need to manually compile data and make calculations. Simply run the report using the automated software then take a look. You’ll be able to understand and track your company’s cash flow instantly with a fraction of the effort.
Improve Cash Flow with Accounts Receivable Collections Software
By automating manual collections processes, you can streamline the way your company handles accounts receivables. With fewer errors and more access to data, you can reduce your DSO and better improve your business’s cash flow.
If you’re ready to boost your company’s cash flow, sign up for a demo of Gaviti’s AR collections platform and see how automation can improve your DSO by an average of 30%. Stay organized and get paid faster with Gaviti.