How to Decrease DSO (Days Sales Outstanding)

Days Sales Outstanding (DSO) is one of the most important metrics in finance. It measures how long it takes your company to collect cash after a sale — a direct indicator of working capital efficiency and cash flow health.

A high DSO means your money is tied up in unpaid invoices, limiting your ability to reinvest or grow. Lowering DSO frees up liquidity, strengthens the balance sheet, and creates a more predictable cash cycle.

Here's how finance leaders and AR teams can effectively decrease DSO without straining customer relationships.

1. Identify the Root Causes of High DSO

Before you improve DSO, you need to understand why invoices are paid late. Common causes include:

• Errors or missing details on invoices (e.g. incorrect PO numbers)
• Delayed issue resolution
• Weak follow-up cadence
• Overreliance on manual chasing
• Poor visibility into customer payment behaviour

Start by analysing overdue patterns: Which customers or regions drive the largest delays? Are late payments clustered by value, customer type, or error type? This insight helps target improvements where they'll have the greatest impact.

2. Send Accurate and Timely Invoices

Small errors can create weeks of delay. Missing tax IDs, wrong billing contacts, or late invoice delivery all increase DSO.

AR automation software can validate invoice data before sending and ensure delivery to the right person — even across multiple customer systems. AI agents can also respond automatically when customers request copies or corrections, keeping invoices moving through approval cycles without manual intervention.

3. Implement Structured Dunning Workflows

Ad-hoc reminders create inconsistency and missed follow-ups. Instead, build a structured dunning process that clearly defines when and how customers are contacted.

AI agents can handle these communications autonomously, sending polite reminders, continuing existing threads, and adapting tone based on customer behaviour. This consistent, professional cadence shortens collection times while maintaining customer goodwill.

4. Track and Act on Promise-to-Pay Commitments

When customers promise to pay "next week" or "after month-end," that information should never be lost in an inbox. AI agents can capture these commitments automatically, pause reminders until the date passes, and follow up only if payment hasn't arrived.

This ensures accountability and reduces unnecessary follow-ups while keeping your forecast accurate and up-to-date.

5. Escalate at the Customer Level, Not the Invoice Level

Escalation should reflect the customer relationship, not just individual invoices. Chasing aggressively for one small overdue invoice while larger accounts remain unaddressed can create frustration and inefficiency.

AI-driven AR systems can evaluate a customer's total exposure, including all overdue invoices, and escalate appropriately — ensuring resources are focused where they have the biggest impact on DSO reduction.

6. Resolve Issues Quickly

Most overdue payments start as minor issues: disputed charges, mismatched POs, or missing documentation. The longer it takes to resolve them, the longer your cash stays trapped.

AI agents can handle inbound queries in real time, providing invoice copies, reconciling remittances, or routing complex cases to humans for resolution. The faster you clear blockers, the lower your DSO.

7. Improve Collaboration Across Teams

Getting paid faster is not just a finance responsibility. Sales, customer success, and account management all influence payment timing. Regular cross-functional reviews of overdue accounts can surface valuable context — such as renewal discussions or service disputes — before they delay payment further.

AI agents can automatically flag high-value or at-risk accounts, notifying the right people internally when a human touch is needed.

8. Use AI Agents to Scale Collections Without Scaling Headcount

Traditional automation can send reminders; AI agents can manage collections. They handle two-way conversations, detect intent, update ERP data, and escalate intelligently.

AI agents can:

• Automate dunning and follow-ups at scale
• Capture and track promise-to-pay commitments
• Respond to customer queries instantly
• Find the right contact when emails bounce
• Prioritise customers based on total overdue value and risk

This transforms collections from a manual bottleneck into a self-optimising system that drives consistent cash flow improvements.

9. Measure, Optimise, Repeat

DSO improvement is an ongoing process. Track metrics such as:

• DSO by customer segment or region
• Promise-to-pay accuracy
• Average resolution time for disputes
• Collection rate by workflow or communication type

Use these insights to refine outreach cadence, messaging, and escalation strategy. Over time, continuous optimisation compounds into a lasting DSO reduction.

Conclusion

Decreasing DSO is about more than chasing customers faster — it's about building smarter, data-driven, and automated AR workflows. With AI agents managing reminders, resolving issues, and escalating intelligently, finance teams can collect faster, improve cash flow, and maintain strong customer relationships.

Want to learn how AI agents can help your team decrease DSO? Book a demo with Paraglide AI.