How to Cut DSO in a Mid-Market Company in 90 Days

1. Why DSO matters for mid‑market cash

DSO is not an accounting metric; it is working capital trapped in your receivables. A 10‑day DSO reduction on €20M of annual revenue frees roughly €550K in cash. That money can fund hiring, inventory, or growth without increasing debt.

European trade credit benchmarks show average payment terms in the 45–60 day range, yet many mid‑market firms drift to 70+ days because disputes and inconsistent follow‑ups compound. The gap is usually not “bad customers” but fragmented processes and unclear ownership.

The cost is not only cash. Late payments trigger higher financing costs and unstable forecasts. CFO priorities consistently rank cash visibility and working‑capital control among the top three levers for 2025. Reducing DSO is one of the fastest levers with board‑level impact.

2. The 3‑step approach that works in 90 days

Step 1 — Segment receivables by risk and impact

Not all invoices are equal. Segment receivables by payer behavior, contract terms, and dispute history. A simple risk score (late history + dispute frequency + amount) makes 80% of the cash problem visible in 20% of accounts. This is where focus should go first.

Step 2 — Automate dunning with escalation rules

Manual follow‑ups are inconsistent and slow. Create automated email sequences with clear escalation points (e.g., 7, 14, 30 days past due). Pair automation with dispute resolution SLAs so issues are closed fast. A consistent process reduces late‑payment drift without harming relationships.

Step 3 — Put DSO and disputes on a real‑time dashboard

The CFO cannot steer what is invisible. A live dashboard showing DSO by segment, dispute pipeline, and weekly cash inflow allows fast action. Teams that track DSO weekly, not monthly, sustain the 10–15 day reduction instead of losing it after the first quarter.

3. What we deliver

The deliverable is not another spreadsheet; it is an operating system for cash. We typically deliver within 90 days:

• Real‑time DSO dashboard with alerts by segment and payer risk.
• Automated dunning workflows (email + escalation rules).
• Dispute resolution playbook with SLAs and owners.
• Customer risk scoring and prioritization for collection effort.

This work is led by finance with support from our AI agents and a fractional expert when escalation is needed.

4. Timeline: 90 days to impact

A typical timeline for a mid‑market firm:

• Weeks 1–2: Baseline DSO, invoice data cleanup, segmentation by risk.
• Weeks 3–6: Dunning automation + dispute workflow, initial dashboard.
• Weeks 7–12: Rollout to teams, KPI cadence, board reporting pack.

By week 12, most teams stabilize 10–15 days of DSO reduction and see cash flow visibility improve immediately.

5. Align sales and finance to avoid the rebound

The biggest DSO rebounds happen when sales and finance are misaligned. Sales negotiates terms to win deals, finance chases cash afterward, and customers get mixed signals. A simple fix is to agree on a small set of payment terms by segment and enforce them with exceptions that are visible to the CFO. This prevents “special cases” from becoming the norm.

Another blocker is dispute handling. If disputes sit in limbo for 30 days, DSO climbs even with perfect dunning. Define a dispute SLA (for example, 5 business days) and assign owners. This one change often cuts overdue balances by double digits because invoices are either fixed or paid faster.

Finally, measure DSO by segment instead of one global number. A single average hides the real problem. Segment visibility tells leadership exactly where to intervene and makes the 90‑day target achievable.