The DSO under the microscope
A healthy DSO ensures sufficient cash flow for an organisation. 41 percent of the companies represented in the study seem to have little to worry about this as they recorded a DSO lower than 30 days. Nevertheless, twelve percent of organisations are experiencing alarmingly high DSO, with a duration of more than forty days. The most concerning part is that 72 percent of finance professionals expect DSO to remain the same or increase in 2024. So, unsurprisingly, one-third of the professionals surveyed (33%) said they intended to focus more on lowering the DSO.
Prioritising personal approach
The DSO increases when customers do not pay their invoices (on time). But why won’t they pay? Here are a few reasons that finance professionals specified: customer cash flow problems, financial uncertainty due to (impending) recession, lack of expertise in essential functions.
Understanding the reasons why customers do not pay their invoices on time enables companies to take respective measures. Most organisations (28%) opt for the personal approach here, contacting customers face-to-face, by phone or email. In addition, they may offer a range of online payment options (26%) to increase customers’ ease of payment. Moreover, finance professionals often rely on software for support: one in five (21%) use specialised software for collection and reminders, making the management and follow-up of outstanding invoices more efficient and streamlined.
Improving the credit management process
An effective credit management process ensures that customers continue to pay their invoices on time not only now, but also in the future. However, finance professionals face several challenges in taking this process to the next level. The biggest obstacles are:
The power of credit management software
Despite automation being known for bringing efficiency, thirteen percent of the professionals reported a lack of the right technology or automation hindering their credit management process. Fortunately, nearly half of the
organisations represented in the research (47 percent) already use ERP systems, and 21 percent use dedicated credit management software for accounts receivable management. The rest opt for more manual options for
accounts receivable management, which have proven to be more error-prone:
On the road to real-time financial insight
Manually maintaining accounts receivable management often means no real-time insight into financial data, which is surprising for 2024. In fact, real-time reporting enables organisations to respond quickly to changing market conditions and helps identify business opportunities. However, only 37 percent of organisations still have access to real-time data for eporting, which results in only 8 percent reporting financial data in real time.
Switching to real-time reporting is not easy, finance professionals note. The main obstacles for organisations in implementing real-time reporting are the adjustment of organisational structure (18%), excessive investment (13%), as well as data security and compliance issues (11%).
Switching to real-time reporting is not easy, finance professionals note. The main obstacles for organisations in implementing real-time reporting are the adjustment of organisational structure (18%), excessive investment (13%), as well as data security and compliance issues (11%).
Challenges on the road to real-time reporting:
Financial health as a priority
Effective credit management is critical to the financial health of an organisation. But the improving economic situation should not mean less focus on this. Indeed, challenges such as access to real-time data and lack of technological support remain a concern. It is therefore essential that organisations invest in advanced tools for automation, enabling finance professionals to make informed and datadriven decisions. Not just for today, but also for tomorrow.
