How to reduce DSO: Proven strategies to improve cash flow

A healthy P&L and a growing top line should feel like success. For many mid-market finance leaders, it feels more like a trap. Revenue looks strong in board slides, yet every Thursday the question still comes up: is there enough cash in the bank to run payroll on Friday?

Credit lines sit close to maxed out, even though sales targets are being hit. Vendor calls become uncomfortable as payment dates are pushed back, not because the business is failing, but because cash is stuck in unpaid invoices. The company is profitable on paper and starved of working capital in reality.

This is the mid-market cash flow squeeze. Research shows hundreds of billions in receivables locked up across companies, and mid-market firms feel it sharply. DSO drifts from 40 to 55 to 65 days without anyone quite registering when the problem escalated. The result is a constant tension between funding growth and simply keeping the lights on.

For finance leaders trying to reduce DSO, the challenge is not a lack of ideas. It is turning those ideas into something that works at mid-market scale, with limited AR headcount and limited IT support, while protecting customer relationships. This guide speaks directly to that reality and sets out a practical 90-day playbook to improve cash flow and unlock working capital without turning collections into a source of conflict.

The mid-market DSO dilemma: you're stuck in the middle

This guide is designed for a very specific audience. Not startups sending a handful of invoices each month and tracking everything in a spreadsheet. Not global enterprises with dedicated transformation teams, ERP specialists and year-long implementations. It is written for mid-market finance leaders who sit in the uncomfortable middle.

If the finance function is processing roughly 500 to 2,000 invoices each month with a 2 to 4 person AR team, and the primary systems are tools like QuickBooks, Xero or similar accounting platforms, this is the context being addressed.

Within that, there are three main personas searching for ways to reduce DSO:

• CFOs and finance directors who need to protect working capital while still funding growth and investment
  
  
• AR managers and credit controllers who spend most of the week chasing overdue invoices and resolving disputes
  
  
• Finance operations leaders who are tasked with scaling processes without being allowed to scale headcount at the same pace
  
  

All three groups feel the same set of pressures.

Customer relationship tension is constant. Many mid-market suppliers sell into larger customers who expect 60, 90 or even 120-day terms as standard. Pushing back can feel risky. Collections conversations are often dreaded, because there is a very real fear that being too firm will push a hard-won account toward a bigger competitor.

Sales and finance frequently pull in different directions. Sales teams extend generous payment terms to win business. Finance teams see DSO rising and worry about cash flow. Without clear rules and shared visibility, this becomes a tug of war that erodes both profitability and trust.

Above everything sits a lack of visibility. Information about who owes what, which invoices are disputed and which customers are habitually late often exists across multiple spreadsheets, email threads and the accounting system. When DSO creeps up, the cause is not obvious. When a key AR team member is on leave, important context disappears with them.

Too large to manage receivables in a spreadsheet, too small to justify a sprawling enterprise AR system, many mid-market teams are stuck in an awkward middle ground. The aim of this guide is to give those teams a clear, realistic path to reduce DSO in 90 days.

How to diagnose your true DSO problem in under 30 minutes

Before creating a plan to reduce DSO, it helps to quickly understand the size and nature of the problem. This does not require a full-scale analytics project. A focused 30-minute diagnostic can reveal whether DSO is broadly healthy, slightly off track or a serious risk to cash flow.

At its simplest, DSO calculation looks at how long it takes on average to collect cash from credit sales. There are several formulas in use. For most mid-market teams, a straightforward version is enough for day-to-day decisions:

Whether this is run monthly or quarterly, the real power comes from comparing the result to two things:

• Industry benchmarks
  
  
• The company’s own stated payment terms
  
  

If standard terms are net 30 but DSO is sitting at 55 days, the business is effectively offering most customers interest-free 25-day credit on top of the agreed terms. That has a direct impact on working capital.

How your DSO stacks up against industry peers

While every business is different, mid-market finance leaders can use broad ranges as a useful sense check. For many sectors, target DSOs might look like the following:

• Manufacturing: often under 30 days, where possible
  
  
• Distribution and wholesale: typically under 35 days
  
  
• Professional services: commonly under 40 days
  
  
• SaaS and recurring revenue models: often under 45 days, depending on contract mix
  
  

If a company’s DSO is significantly higher than these ranges, especially if contractual terms are shorter, it is a sign that DSO is not just a side effect of the business model but a solvable process issue.

Another useful rule of thumb is to compare DSO to payment terms. A healthy target is often to keep DSO within about 20% of standard terms. For example, net 30 terms might align with a DSO target in the mid to high 30s. Net 45 terms might aim for DSO in the low 50s. When the gap widens further, cash is being locked up.

The quick health check your AR needs

The next part of the 30-minute diagnostic is to look beyond the top-line DSO number and inspect the underlying pattern in receivables. This is where the aging report becomes invaluable.

Start by pulling a basic aging report from the accounting system, segmented into standard buckets such as current, 1 to 30 days past due, 31 to 60, 61 to 90 and 90+ days.

Key red flags to look for include:

• A high percentage of total receivables sitting in the 61 to 90 and 90+ buckets
  
  
• Large individual invoices aged beyond 60 days
  
  
• Specific customers who appear repeatedly in the older buckets
  
  
• Any pattern where invoices are regularly allowed to drift past 120 days
  
  

If this quick review shows a significant tail of older invoices, the DSO issue is not purely theoretical. It is directly affecting cash flow and increasing the risk of non collection.

This is the moment to capture a clear baseline. A simple dashboard that tracks DSO, aging bucket totals and top late-paying customers can turn a vague concern into a measurable performance gap. 

For teams that do not already have this, downloading an accounts receivable dashboard template and plugging in current figures is a powerful next step. It creates a single view of the problem and a way to track the impact of changes over the next 90 days.

Why standard DSO advice fails mid-market teams

A quick search for ways to reduce DSO will surface familiar recommendations: 

• Send invoices faster
• Offer early payment discounts
• Tighten credit policies 
• Automate reminders
• Outsource collections

In theory, none of this is wrong. In practice, much of it fails at mid-market scale.

Manual process improvements are usually the first response. The AR team sends a few extra reminders, creates standard email templates and blocks out time each week to chase overdue invoices. This can create a short-term lift, but it does not scale. As invoice volume grows, the team spends more and more time on repetitive follow-ups and less on resolving root causes. Burnout rises, and execution becomes inconsistent.

Adjusting payment terms seems logical as well. Moving from net 60 to net 30, or adding late fees, looks decisive on paper. On the ground, sales teams often promise extended terms to close deals. Large customers demand the terms they want regardless of what is written in the contract. Finance ends up with policies that do not match reality and the resulting conflicts strain internal relationships.

Basic automation inside accounting systems promises relief, but often delivers partial fixes and new problems. Tools like standard reminder functions in QuickBooks or Xero might send emails, yet they leave AR teams working across multiple data silos. Invoices sit in the accounting system, and communication history sits in inboxes and spreadsheets. There is no single place to see the full picture.

At the other extreme, enterprise-grade AR software can appear attractive, particularly where it promises advanced workflows and analytics. For mid-market companies, these platforms often prove too complex and resource-hungry. Implementations that were supposed to take 30 days stretch to six months or more. Dedicated project managers are required. Every small change means new configuration work and unexpected cost.

Some companies turn to collections agencies or invoice factoring. These options can unlock cash, but at a high price. Agencies typically take a large percentage of recovered amounts and may handle customers in ways that damage long-term relationships. Factoring is expensive to use continuously and can change how customers perceive the business.

The common thread is that many standard solutions were not designed for mid-market teams that have enterprise-level invoice volume but limited resources and tight customer relationships. To reduce DSO effectively, the approach needs to match that reality.

The 5-step playbook to reduce DSO in 90 days

The following playbook focuses on five practical steps that mid-market teams can implement in roughly a 90-day window. Each step covers the strategy, why it often fails, how to succeed and how Chaser supports that change.

1. Automate your payment reminders the right way

Automated reminders are one of the quickest ways to speed up payments and bring down DSO. When communication is timely and consistent, invoices stay front of mind for customers, without your AR team having to chase manually every step of the way.

The challenge for mid-market teams is that the tools at either end of the spectrum don’t really fit. Basic reminder features in accounting systems, or manual email follow-ups, tend to be limited to a single channel and become unmanageable as volumes grow. On the other hand, heavyweight enterprise platforms promise sophisticated automation but come with long implementation cycles and complex configuration that many teams don’t have the time or headcount to manage. The result is that finance teams get stuck between too little power and too much complexity.

The sweet spot is automation that is genuinely powerful but still easy to run day to day. In practice, that means looking for a solution that:

• Connects to your existing accounting system in days rather than months
  
  
• Manages multiple channels, such as email and SMS, from one place
  
  
• Lets you use different reminder schedules for different customer segments
  
  
• Keeps language, sign-offs and signatures aligned with how your team actually speaks, so messages feel like real 1:1 communication
  
  

With this kind of setup, most routine chasing can happen automatically. The AR team only needs to step in for exceptions, disputes or high-value cases, rather than spending time copying and pasting email templates.

That is where Chaser comes in. Chaser offers multichannel automation that plugs directly into your accounting systems. Finance teams can build tailored reminder journeys for different customer groups, using real team signatures so every message feels personal rather than robotic.

Email, SMS and even letter workflows can all run with minimal intervention, often achieving 80 to 90% touchless processing. This level of automation helps reduce DSO while still protecting the customer experience, so you do not have to choose between getting paid faster and maintaining strong relationships.

2. Prioritize your AR effort with AI, not guesswork

Not every overdue invoice carries the same level of risk. To really reduce DSO, AR teams need to spend their time on the customers and invoices that are most likely to pay late, or not pay at all, rather than treating everything the same.

The problem for many mid-market teams is that prioritization is still done by manually scanning aging reports and making judgment calls. This is slow, it varies from person to person, and it tends to push attention toward the largest balances or the noisiest customers, not necessarily the riskiest debts. Important warning signs can be missed until an invoice is already far beyond 60 or 90 days overdue.

The aim is to move from reactive review of an aging report to proactive, risk based prioritization. In practice, that means using tools that can:

• Analyse historical payment patterns across customers
  
  
• Flag invoices that display early signs of late payment
  
  
• Group invoices into risk categories so staff know where to focus
  
  
• Recommend optimal chasing times when customers are most likely to respond
  
  

With this kind of insight, the AR team can design workflows where low risk invoices are almost fully automated, while high risk invoices receive earlier, more frequent and more personal attention.

Chaser’s late payment predictor supports exactly this approach. It uses AI to assess how likely it is that a given invoice will be paid late, based on factors such as due date, value, customer history and previous chasing activity. 

Each invoice is assigned a clear risk level, and each customer receives a Payer Rating that reflects their overall payment behavior. Recommended chasing times help maximise response rates. Taken together, these features turn prioritization from guesswork into a data driven process that reduces DSO faster and with less wasted effort.

3. Make it easy for customers to pay you

The easier it is for customers to pay, the more likely they are to pay on time. When you remove friction from the payment process, you see a direct impact on cash flow and DSO.

Many mid-market suppliers still send invoices that force customers to log into their banking portal, set up a new payee and manually enter references. There is often no obvious way to pay by card or set up a payment plan. Even customers who want to pay promptly can be held up by internal approvals, clunky processes or simple inconvenience.

The goal is to remove these barriers so paying becomes the natural next step. Finance teams can:

• Include clear payment links in every reminder and invoice
  
  
• Offer multiple payment methods, such as card, bank transfer and digital wallets where appropriate
  
  
• Provide a self service payment portal where customers can see outstanding invoices and pay them in a few clicks
  
  
• Allow structured payment plans for customers experiencing temporary cash constraints
  
  

This approach turns the collections process from a series of nudges into a smooth experience where the path to payment is always obvious and easy.

Chaser’s payment portal gives customers a secure place to view all their outstanding invoices and settle them instantly. Through Chaser Pay, they can pay by card or bank transfer in a single flow. Payment links can be embedded directly into automated reminders, so the journey from email to payment takes only a few seconds. 

For customers who need more flexibility, payment plans can be set up in the same system, helping both sides manage cash without conflict. Together, these features remove friction from the payment process and support faster collections across the ledger.

4. Fix your scattered data problem

To manage DSO effectively, finance leaders need a single, clear view of accounts receivable. That means seeing invoices, chasing history, customer replies, disputes and payment promises in one place. Without this, it is hard to see where bottlenecks are or to coordinate work across the team.

In many mid-market companies, data about receivables is scattered across different systems. The accounting platform holds invoice totals. Spreadsheets track special arrangements or promised dates. Email threads contain the history of every difficult conversation. Individual AR staff keep their own notes. When someone leaves, that context often disappears with them. When a customer calls in, it can take several minutes to piece together the story of their account.

Fixing this takes more than another spreadsheet. It means creating a single source of truth for AR, where:

• All chase activity is logged automatically
  
  
• Customer responses and disputes are captured against the right account
  
  
• Payment promises are visible to the whole team
  
  
• Call notes and outcomes are recorded in one place
  
  
• Reporting dashboards draw from a central dataset
  
  

With this foundation, the finance team can respond faster to customer queries, handle handovers smoothly and spot trends in late payment behavior much earlier.

Chaser acts as a financial CRM for receivables. It connects to the accounting system and brings all AR activity into one platform. Emails sent through Chaser are logged automatically. Customer replies and dispute reasons sit alongside the related invoices. 

Payment promises and call notes can be recorded and viewed by the whole team. When a customer gets in touch, the person answering has a complete timeline of every interaction. This single source of truth turns AR from a patchwork of individual efforts into a coordinated process, which in turn supports sustained DSO reduction.

5. Recover stuck cash without burning bridges

Even with strong processes in place, some invoices will still age beyond 90 or 120 days. The aim at that point is to recover the cash in a way that protects valuable customer relationships wherever possible.

For many mid-market teams, this is where things become uncomfortable. Traditional collections agencies can be effective at recovering debt, but their approach often clashes with the supplier's brand and values. They may operate with limited transparency and charge significant fees on amounts recovered. As a result, finance leaders hesitate to escalate and instead hope customers will eventually pay. In the meantime, DSO rises and cash stays locked up.

What works better is an escalation path that is structured and visible, but still aligned with the existing customer relationship. In practice, that can mean:

• Defining clear triggers for escalation, such as 90 or 120 days past due
  
  
• Using a specialised collections service that focuses on friendly, relationship aware recovery
  
  
• Making sure all escalation activity remains visible within the company's AR system
  
  
• Keeping the option open to continue trading with customers who resolve their debts appropriately
  
  

Handled in this way, escalation is not a punishment. It becomes a process that protects cash flow and gives customers a final, professional opportunity to settle what they owe.

Chaser Collections is designed with this balance in mind. It offers a no win no fee recovery service that aims to preserve customer relationships wherever possible. Because it is integrated with the main Chaser platform, all escalation activity is visible to the finance team. 

Control does not disappear into a third party black box. Instead, severely overdue accounts move through a structured process that works to secure payment while keeping lines of communication open. For mid-market companies, this provides a practical way to tackle aged receivables without undermining the trust built up over years.

Real results: how mid-market companies reduced DSO

Tactics are more convincing when they are backed by real world outcomes. Several mid-market organisations have used the approach described above, supported by Chaser’s tools, to reduce DSO and improve cash flow in a measurable way.

The Community Energy Scheme faced significant overdue balances and needed to recover cash without harming relationships with vulnerable customers. By using automated but personalised reminders and giving customers access to a clear payment portal, the organisation reclaimed a large portion of overdue funds and set up smoother direct debit flows for the future.

FHC/Docuflow, operating in the professional services space, needed to shorten the time between work completed and cash received. After implementing multi channel automation and better prioritisation, they achieved a striking result: invoices were paid 54 days faster on average. That kind of shift transforms working capital and reduces reliance on external finance.

In another example, a partner company working with Chaser reported a 75% reduction in DSO. While that sort of improvement sits at the extreme of what is possible, it demonstrates what can happen when predictive prioritisation, automation and process discipline come together.

Across the wider customer base, Chaser regularly sees mid-market companies achieve DSO reductions in the range of 10 to 14 days within the first year. For a business with tens of millions in annual revenue, even a single digit reduction can free hundreds of thousands in working capital that can be redirected into growth and resilience rather than sitting in unpaid invoices.

More than a number: what success feels like

DSO is a useful metric, but the real goal is not simply to move a figure on a dashboard. It is to change the day-to-day experience of running the finance function and the wider business.

When receivables are under control, payroll stops being a weekly source of anxiety. The finance team is no longer calculating how long supplier payments can be stretched without damaging relationships. Conversations with banks become more confident, because the company can demonstrate strong cash conversion rather than relying on hope and goodwill.

Inside the AR team, the working day looks different. Instead of constantly firefighting overdue invoices, staff spend more time on higher value activities, such as refining credit policies, collaborating with sales on better terms for new contracts or analysing customer payment behaviour. Workloads become more sustainable and staff turnover tends to fall.

Customer relationships improve as well. Automated reminders that feel personal keep both sides aligned without creating tension. A clear payment portal and flexible options such as plans or multiple payment methods show respect for the customer’s time. Collections calls, when needed, are based on accurate, up to date information, which makes conversations smoother and more productive.

Strategically, the shift is from survival mode to opportunity mode. When working capital is no longer trapped in receivables, management teams can ask different questions. Instead of wondering how to cover next month’s commitments, the focus becomes how to invest surplus cash into growth opportunities, new product lines or market expansion. Reducing DSO becomes a foundation for long term resilience and competitive advantage, not just a short term cash fix.

Your next steps to faster payments and healthier cash flow

Reducing DSO in a mid-market environment is not about heroic one time efforts or complex enterprise projects. It is about putting the right building blocks in place: targeted automation that works at the scale and complexity of the business, better prioritisation, easier payment paths and a single source of truth for all AR activity.

A practical path forward looks something like this:

• Run the 30-minute diagnostic to understand the current DSO position and aging profile
  
  
• Set up or refine a simple AR dashboard to track progress
  
  
• Implement multi channel automated reminders that still feel personal
  
  
• Use predictive tools to focus the team on the riskiest invoices first
  
  
• Provide customers with a modern payment portal and flexible options
  
  
• Consolidate AR data so every interaction and promise is visible in one place
  
  
• Establish a clear, relationship aware escalation route for aged debt
  
  

Chaser is built to help mid-market finance leaders implement exactly these steps, often within a 90 day window. To see how this could look in a specific context, the most direct next move is to book a 15 minute demo. That short conversation can show how the platform connects to existing systems, automates chasing, prioritises risk and supports a more effective collections process.

For those who prefer to explore at a gentler pace, a one-minute product tour or an ROI calculator can provide a quick view of how changes in DSO translate into free working capital for the business.

However the journey begins, the destination is clear. A lower DSO, faster payments and a healthier cash flow position allows the business to grow from a position of strength rather than constant cash tension.

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