European companies should expect
higher DSO in 2024

DSO in 2024

Research by Onguard earlier this year showed that almost half of organisations in the Netherlands have to wait more than 30 days for their invoices to be paid. The findings are confirmed in a recent study by Allianz, unveiling an increase in global DSO by +3 days in 2023. 

A high Days Sales Outstanding (DSO) means that it takes longer for a company to collect money from its customers after making a sale. This results in limited cash flow that significantly affects an organisation’s smooth operation. According to European Commission data, one in four bankruptcies occur due to late payments of invoices. A recent report published by insurance giant Allianz, based on data from 45.000 firms from 35 countries, showed an upward trend for DSO in European corporations. 

Allianz study – Key findings 

  • Global DSO grew by +3 days to 59 days in 2023, the biggest jump since 2008, with 1 in 5 corporations globally paying their suppliers after 90 days. 
  • 44% of companies in Europe posted payment terms above 60 days of turnover at the end of 2023. 
  • European companies should expect longer payment terms amid squeezing profitability in 2024. 

Read also: CEO and CFO, do you know your DSO? 

This is in line with Onguard’s recent findings. The latest edition of the FinTech Barometer, based on a survey of 300+ CFOs and financial professionals in the Netherlands, showed that 47% of the organisations have an average DSO of more than 30 days, and another 12% have an average DSO of more than 40 days. A more recent LinkedIn poll by BNR Nieuwsradio showed that half of the 376 respondents in the Netherlands have their invoices paid too late. 

But what is the main driver behind this late payment pattern? 

Allianz’s research indicated declining profitability and higher operating costs as the key factors for the growing DSO in Europe. “Some companies do not want to pay, others cannot pay,” said Adriaan Kom, Managing Director at Onguard, in a recent interview on BNR Nieuwsradio about this topic. For those who are truly unable to pay on time, the most common reason is cash flow problems, such as increased wage costs. 

“Our research shows that, in particular, the construction and health care sectors often pay later,” Adriaan specifies. 

The way forward for DSO in 2024

Only 7% of finance professionals in the Onguard study are optimistic about getting their invoices paid more quickly in 2024. Meanwhile, 19% expect the DSO to increase in 2024. The majority (53%) expect the DSO to remain the same this year. 

And while the new proposal by the European Commission on the EU Late Payment regulation could significantly lower the DSO for European companies by enforcing stricter 30-day payment deadlines, Allianz estimates that European companies would need EUR 2 trillion in additional financing to address the resulting gap. 

With profitability looming in 2024, European companies must brace for longer payment terms. This could increase pressure on cash flows and potentially increase the risk of non-payment in the region,” the Allianz report mentions. 

What about your DSO? Over 750 companies from different industries worldwide have chosen Onguard and improved their DSO by up to 20%. Get in touch and learn how.

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