How can companies avoid payment pitfalls and lower their DSO in times of economic uncertainty?
When it comes to late payments, prevention is always better than a cure. As anyone involved in credit management will know, if payments aren’t made promptly, this can cause major issues for businesses – no matter their size, shape or industry standing. So how can companies avoid payment pitfalls and lower their DSO?
Credit managers now have the chance to be creative. Necessity is the mother of all inventions – and now’s the time to come up with new ways to encourage suppliers to pay on time. Lowering your DSO doesn’t have to be difficult.
To help you get started, here are four top tips:
1. Get your terms in writing
A paper trail is a great place to start. If your payment terms are in black and white, there’s no room for doubt. Once they’re in print, make sure your terms are easily accessible to your clients, as well as your team. This provides consistency and clarity. Even if it’s widely known that payment is expected within 15 days, it’s worth having it in writing – this reinforces the rule and acts as a constant.
2. Keep on top of your invoicing
The longer you leave it to invoice, the more likely you’ll be left waiting for payment. Try to invoice straight away. Even if it seems like extra admin to process bills one by one, avoiding batch invoicing can kickstart the payment process earlier. This way, customers haven’t had time to forget that they owe you – and this could help avoid delays, as well as maintain a steady flow of income into the business. Of course, having the right tools for the job can vastly improve the process. Visma | Onguard’s CreditManager solution can help consolidate invoices into one platform, allowing all data to be accessed via one screen and invoices to be sent out automatically. Users can then get a complete profile of each customer, with helpful highlights such as outstanding invoices or payment tendencies.
3. Act fast on late payments
Urgency is the name of the game. The longer you wait, the longer you’ll be kept waiting. Even if you trust that the money will come in at some point. As soon as a payment deadline is missed, contact your client right away, preferably in a manner you know they will respond well to.
4. Automate and optimise
Using the right tools can speed up the payment process. Archaic systems can be time-consuming and frustrating, and time spent tackling these inefficiencies is time that could otherwise be spent preventing late payments and lowering your DSO. Specialist order-to-cash software can save time, minimise effort and integrate with existing ERM systems, while helping to boost client relationships. They offer flexible, configurable solutions for all late-payment scenarios.
The long-term benefits of a lower DSO
When businesses are paid promptly, suppliers can be paid on time, who can then pay their own suppliers on time. And so the cycle continues. Simply by getting terms in writing, avoiding batch invoicing, acting quickly on late payments and making use of automation and specialist order-to-cash software to speed up the payment process, it’s possible to lower your DSO, avoiding the pitfalls of payment delays, helping avoid blockages in the supply chain, facilitating business continuity and promoting positive inter-organisational relationships.