Days Sales Outstanding is more than a finance metric. It’s one of the leading indicators of operational maturity.

As your business scales and becomes more structured, weak spots often surface. In my experience, one of the earliest areas they appear is in accounts receivable and days sales outstanding (“DSO”). DSO measures how long it takes a company to collect payment after a sale.

Below, I’ll share why DSO matters, common pitfalls and a three-step action plan to help CFOs bring structure to collections, reduce DSO quickly and protect cash flow without damaging customer relationships.

Why Days Sales Outstanding Matters

DSO is more than a finance metric. It’s one of the leading indicators of operational maturity. A lower DSO typically reflects healthy cash flow and operational discipline. A higher DSO often means a slower collections process, handoff issues, unclear ownership or legacy processes that no longer scale. Without predictability in collections, it’s harder to plan and invest with confidence. Improving DSO can help give you more room to make forward-looking decisions and invest in future growth.

Common Days Sales Outstanding Pitfalls 

When tackling DSO challenges, first step back and identify underlying drivers. From my experience, high DSO is rarely a result of inadequate follow-up. More often, it reflects well-intentioned decisions or processes that no longer scale effectively.

Look for the common pitfalls:

1. Role confusion: Customer-facing teams (i.e. customer success or account management) juggle both sales and collections, creating a conflict of interest and compromising focus and outcomes.

2. Billing complexity and custom terms: Early-stage companies often agree to customer-specific billing formats that require manual effort and increase the risk of errors and delays. Revisit these legacy terms with customers to determine what can be standardized or automated to speed up collections.

3. Lack of internal focus: DSO is reported but not actively managed or reviewed on a regular cadence.

4. Avoidant culture: Teams hesitate to have difficult payment conversations, particularly with long-standing clients.

5. Wrong point of contact or outdated information: Invoices and payment reminders often go to users, sales or outdated inboxes instead of Finance. Confirm the correct billing contact during onboarding, assign ownership for keeping information current, and maintain a clean, centralized list to avoid missed messages and delays.

6. Lack of enforcement: Clients continue receiving service regardless of payment status.

Set up a weekly cross-functional review, your collections hour, to keep visibility high…

3-Step Action Plan for Managing DSO

Step 1 – Reporting: Build Visibility and a Review Cadence

Start by establishing visibility with custom reporting. A DSO dashboard segmenting aging receivables by client, tier, region and overdue status can quickly surface problem areas. You can build this in your ERP, BI tool or even Excel.

Next, set up a weekly cross-functional review, your collections hour, to keep visibility high and unblock payments. Include Finance and Accounting, with Sales or Customer Success joining as needed based on the collections list. Align with your CRO and executive leadership to reinforce collections are a company priority, not just a Finance task.

In each session, focus on:

  • Tiered outreach: For example, prioritize accounts 90+ days past due. This graduated approach helped to concentrate our efforts on the most at-risk cash while ensuring strategic escalation.
  • Find the right contact: It’s worth getting creative to identify the right billing contact. Misrouted invoices are a common (and avoidable) cause of delays.
  • Personalized outreach: Favor phone calls over emails. They’re more effective and build accountability on both sides.

Implementation Insight: An LLR portfolio company saw the fastest results when its CFO reached out directly to their counterpart. This peer-to-peer outreach helped to bypass noise, resolve miscommunication and establish mutual accountability. Reporting drives clarity. Consistency and follow-through drive results. Make the weekly reviews and follow-ups non-negotiable.

Block time each week for your Head of Finance to personally drive outreach on top accounts.

Step 2 – Ownership: Make Finance the Owner

Collections shouldn’t sit with Operations or Customer Success. To build urgency, credibility and consistency, ownership must shift to Finance. Transferring ownership to Finance leadership anchors the process and signals accountability at the top.

Block time each week for your Head of Finance to personally drive outreach on top accounts. Use this time to make calls, clear roadblocks and prepare updates for the next cross-functional session. Prioritize executive alignment by coordinating with Customer Success leadership and your CRO to ensure a united front and prevent service continuation without payment.

CFO-led outreach sets the tone and drives accountability. Start with Accounts Payable (“AP”), the team that processes the invoice. Be courteous, clear and firm. Confirm they have what they need to release payment, and if you do not get confirmation, escalate appropriately. This shows you respect their process while signaling you will follow through if needed. Once AP knows you will escalate when payments stall, future collections tend to move faster.

Step 3 – Enforcement: Introduce Accountability and Follow-Through

Visibility and ownership set the foundation, but consistent enforcement ensures follow-through. Enforcement should balance accountability with judgment and align to the importance of each customer relationship. How you apply it depends on how critical your offering is and the potential business impact of escalation.

Key components to consider:

  • Set clear policies: Clearly communicate your outstanding-payment policy and resolution process led by Finance.
  • Align before escalation: Use service holds or credit pauses only after clear communication and internal alignment.
  • Escalate thoughtfully: Reserve legal action for persistent or material issues, after direct outreach has been exhausted.

Enforcement is not about being punitive. It reinforces timely payment is part of the overall value exchange and helps to rebuild accountability where it may have weakened. Most, if not all, delays in collections stem from misalignment, process confusion or competing priorities. Not bad intent. A communication plan helps create clarity, surface gaps and enable resolution in a respectful way.

Here’s the bottom line.

High DSO isn’t just a Finance issue. Most often, it’s a sign of operational gaps. Typically, improving collections starts with better reporting and visibility, clear ownership within Finance and a consistent follow-up cadence. Reliable collections give you flexibility to reinvest in growth without compromising the customer relationships your business was built on.