Guide For CFOs To Minimize Days Sales Outstanding

Chief Financial Officers, or CFOs, often wear many hats. Aside from the standard responsibilities–cash flow management, taxes, and financial planning–today’s CFOs are increasingly responsible for board communications and internal automation and optimizations.

At the end of the day, the main concern for any CFO is financial stability and growth. One of the determining factors of the financial health of a business is consistent cash flow, and one of the key performance indicators is days sales outstanding.

But current economic and job market conditions, such as the great resignation, inflation, and supply chain issues, have the potential to negatively impact businesses’ DSO numbers. While these factors are out of a CFO’s control, there are tactics for minimizing the impact of market conditions and improving your DSO.

Tactics for Minimizing DSO

Audit Internal Processes

The first step to improvement is taking a step back and evaluating your operations. To minimize your days sales outstanding, you first need to know your DSO number and compare it with industry benchmarks and historical performance and monitor any changes over time. Once you’ve thoroughly assessed your DSO, you can use this to review your business.

Auditing your internal processes can help identify any gaps in efficiency, accuracy, or productivity. This includes evaluating your credit decisioning, monitoring, and collections departments.

• Credit decisioning. Minimizing DSO starts with an intelligent, data-driven credit approvals process. Consider the predictability of your credit decisioning and whether you may be approving risky accounts.
• Credit Monitoring. Do you have a proactive credit monitoring SOP in place to identify changes in portfolio behavior that may lead to delinquencies?
• Credit Collections. Optimizing your credit collections can have the most direct effect on your DSO. Assess your collections process for efficiency, communications, and other logistical factors.

There may be simple optimizations your team can implement immediately, such as improving communications with outstanding accounts. Other improvements may be more complicated, but by identifying these obstacles, you can start chipping away at minimizing risk across the board.

Provide Team with the Right Resources

Employees function best when they have the proper resources to do their job well. This includes transparency, access to trainings, and a motivating team environment that inspires optimal performance.
While you may be tempted to cut budgets and reduce waste, it can be more expensive in the long run if you aren’t providing your team with the resources they need. Listen to the experts across your credit risk management departments and ensure you have set them up for success.

Invest in Automation

While there are many elements outside of your control as a CFO or Senior Decision Maker, one of the most powerful tactics at your disposal for minimizing DSO is investing in technology. Credit risk management automation software can improve accuracy, bridge efficiency gaps, maximize productivity, and ultimately reduce risk.

By investing in the right solution, you reduce the risk of human error and free up your team to focus on growing the business.

With Creditpoint Software, our clients have improved productivity by 10x and saved millions in bad debt reduction. In addition to improving days sales outstanding, our configurable solution can also:

• Improve Your Customer Experience
• Increase Transparency & Data Security
• Inform Future Credit Decisioning with Business Intelligence Analytics

Schedule a consultation with CreditPoint Software to learn how you can leverage the benefits of an optimized software solution to minimize days sales outstanding.