Effective cash flow management is essential for any accounting firm, yet many firms and finance teams struggle with slow collections and high days sales outstanding (DSO). Late payments tie up working capital, increase administrative burdens, and create cash flow uncertainty. The good news is that modern accounts receivable software offers a solution by automating key processes and improving the speed and efficiency of collections.
By leveraging automation, firms can significantly reduce DSO, improve client payment experiences, and maintain a steady cash flow.
What is days sales outstanding (DSO) and why does it matter?
Days sales outstanding (DSO) is a critical financial metric that measures the average number of days it takes a company to collect payment after a sale. A high DSO indicates slow collections, which can strain cash flow and limit business growth.
For accounting firms and professional service providers, slow invoice payments create unnecessary cash flow bottlenecks, making it harder to reinvest in the business, pay expenses on time, or allocate resources efficiently. In fact, firms using Aiwyn’s AR automation have reduced their DSO from 60-90 days to as little as two weeks, significantly lowering their reliance on credit lines and reducing interest expenses by hundreds of thousands per year.
How is DSO calculated?
DSO is calculated using the following formula:
DSO = (accounts receivable / total credit sales) × number of days
A lower DSO means faster collections and stronger cash flow stability. Reducing DSO requires a combination of efficient invoicing, automated payment reminders, and seamless client payment options, all of which accounts receivable software can provide.
How accounts receivable software reduces DSO
Implementing accounts receivable software helps firms overcome the common obstacles that delay payments. Here’s how automation can help:
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Automates invoicing and payment requests
Manual invoicing is slow and prone to human error. Accounts receivable software automates invoice generation, delivery, and follow-ups, ensuring clients receive accurate invoices on time. Automated systems can also send reminders before due dates, reducing the likelihood of missed payments. According to research from PYMNTS.com, 62% of firms implementing AR automation have seen measurable reductions in their DSO, speeding up invoice processing.
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Offers multiple, easy payment options
Many delayed payments occur because clients lack convenient payment options. Modern AR software integrates online payment portals, credit card processing, ACH transfers, and digital wallets, making it easy for clients to pay invoices promptly. Aiwyn’s two-sided payment portal allows clients to view all outstanding invoices in one place and pay multiple invoices at once, accelerating collections.
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Sends smart, automated payment reminders
Following up on unpaid invoices can be time-consuming. AR software sends personalized payment reminders at key intervals before, on, and after the due date, keeping invoices top of mind for clients and reducing the need for manual collection efforts.This automation can significantly reduce workload, as organizations using automated AR solutions have cut their manual collection time from 25% to just 5% of staff workload.
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Reduces errors and disputes
Billing errors and unclear invoices lead to payment delays. Accounts receivable software ensures invoices are accurate, well-documented, and transparent, reducing disputes and preventing unnecessary delays in collections. With automated revenue leakage prevention, some firms using Aiwyn’s software have recaptured up to 2% of previously written-off revenue.
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Provides real-time tracking and insights
Tracking outstanding invoices across multiple clients can be overwhelming. AR software offers real-time visibility into aging receivables, helping finance teams prioritize follow-ups and make informed cash flow decisions.
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Enhances the client experience
Clients are more likely to pay on time when the payment process is seamless and professional. AR software provides a streamlined, digital-first experience that eliminates friction, leading to faster payments and stronger client relationships. Firms that have adopted Aiwyn’s client-friendly payment platform report increased collections and greater client satisfaction.
The cash flow impact of reducing DSO
By automating AR processes and reducing DSO, firms can:
- Improve cash flow predictability by ensuring a steady influx of working capital.
- Reduce administrative costs by minimizing manual effort and freeing up time for higher-value tasks.
- Enhance profitability by reducing reliance on credit lines and late-payment penalties.
- Support business growth by increasing cash flow and allowing firms to reinvest in new opportunities.
With Aiwyn, firms have reported reductions in DSO ranging from 30% to 90%, translating into faster collections, improved financial stability, and significant cost savings. One firm reduced its DSO from 45 days to just 14 days, eliminating the need to tap into credit lines.
Invest in the right accounts receivable software
Not all AR software is created equal. When choosing an accounts receivable solution, look for features like:
- Automated invoicing and reminders
- Multiple payment options
- Integration with accounting software
- Real-time reporting and dashboards
- Secure client payment portals
The benefits of investing in AR software are clear: 87% of firms with automated AR say that their overall process speed has improved. It’s a strategic decision that directly impacts cash flow, efficiency, and financial stability.
The future of AR management
Manual AR processes and slow collections are no longer sustainable in today’s fast-moving accounting landscape. Firms that continue relying on outdated methods will struggle with inefficiencies, rising client expectations, and cash flow challenges.
Automating AR isn’t just about efficiency—it’s about financial control and long-term growth. Modern accounts receivable software reduces uncertainty, accelerates collections, and frees up time for strategic priorities. The firms that embrace automation now will be the ones best positioned for future success.
