Lowering DSO with Smarter Net Terms and Cadence
Getting paid faster without damaging customer relationships requires a strategic approach to payment terms and collection timing. This article draws on insights from financial operations experts who have successfully reduced Days Sales Outstanding while maintaining strong client partnerships. The following seven tactics demonstrate how companies can balance firm policies with flexible, human-centered communication.
Send Early Notices with Courteous Details
One approach that consistently lowers DSO for B2B SMB clients is to set clear net terms upfront and pair them with a structured collections cadence that begins well before the invoice due date. We found that including a simple "early reminder" clause in our credit policy—stating that clients will receive automated reminders starting five days before the invoice is due—made a noticeable difference. One real example involved a $12,500 invoice that had been overdue for 18 days. We sent a polite, specific reminder noting the original due date, the outstanding balance, and a direct contact for questions. The exact message was short: "Hi [Client Name], this is a friendly reminder that invoice #4521 for $12,500 was due on [date]. Please confirm receipt and let us know if there are any questions so we can ensure smooth processing." Within 24 hours, payment was confirmed. That combination of clarity, advance notice, and polite directness prevented escalation and reduced slow pays across the board.
Enforce Holds and Prompt Outreach
At The Monterey Company, I lower DSO by setting net terms based on first-order risk, usually a deposit up front for new accounts, net 15 or net 30 for proven buyers, and a clear ship hold on past-due balances that we actually enforce. My cadence is simple and consistent, a friendly reminder a few days before due, a due-date note with a pay link, then a quick call at three days late, and a pause on new work at seven days late until the balance is cleared. One invoice we rescued was stuck in an approval loop, and the step that worked was a short email with the invoice link and ACH option, plus a line that we can hold their production slot once payment is scheduled, and it got paid the same day.
Use Service Pauses over Late Fees
A few years ago I noticed one B2B client had great sales but cash flow always felt tight because invoices drifted past 45 days. DSO kept creeping up. We shifted new contracts to net 15 with an automatic late fee clause and scheduled reminder touchpoints at day 10, 16, and 25, which felt abit assertive at first and I worried it might strain relationships. Funny thing is, clarity reduced friction. One $48,000 invoice was sitting at 62 days until we sent a calm message attaching the signed agreement and stating service would pause at day 30 past due, and it were paid within 48 hours. Through Advanced Professional Accounting Services, DSO dropped from 52 to 34 days in one quarter. The most powerful clause was the pause of services language, not the fee itself.
Add Personal Notes and Offer Adjustments
Our collections changed when we started writing personal notes on invoices. I'd mention their payment terms directly and ask if they needed help with anything. There was this school client, Hire Fitness, who always paid late. I started attaching their payment history and offered to adjust their billing schedule. They started paying on time after that. Showing you get their situation makes all the difference. It felt weird at first reaching out proactively, but now it's just how we do things.
If you have any questions, feel free to reach out to my personal email at james@humbled.com :)
Make Terms Earned and Humanize Follow-Up
When it comes to lowering DSO for B2B SMB clients, I've learned that most problems start much earlier than the first overdue invoice.
We don't treat net terms as a promise. We treat them as something customers earn. New clients start on tighter terms, even if the contract says net-30. Once they've paid two invoices on time, they graduate to true net-30. That one policy change quietly removes a lot of slow-pay risk without creating friction with good customers.
The collections cadence itself is intentionally boring. Automated reminders go out before the due date, not after. A friendly nudge a week ahead, a clear reminder on the due date, and a firm but neutral follow-up a week later. No drama, no escalation language early on.
The most effective step wasn't even from finance. When an invoice hits two weeks overdue, the account owner reaches out. Just a short note asking if anything is blocking payment. That simple shift works because it feels human, not procedural.
One invoice that had been stuck for nearly two months was held up by an internal approval loop on the customer side. That message surfaced the issue, the invoice was re-routed, and payment came through within days.
Lowering DSO isn't about pressure. It's about setting clear expectations, showing up at the right moments, and removing blockers before they harden into excuses.
Automate Suspension Triggers via Advance Alerts
Q1: Reducing Days Sales Outstanding (DSO) can begin by getting away from using a "Net 30" default payment term and replacing that with either trying to align payment terms with the client's Accounts Payable process or offering a one percent (1%) discount for payment within ten (10) days (Net 10). If your organization automates these communications and does so in a manner that seems more personal, this is very likely to enhance cash flow tremendously. For example, sending an email five (5) days prior to the due date as a friendly reminder (or "friendly heads up") and to obtain "one last chance" payment every day after the invoice becomes overdue and automate escalating communication every seventh (7th) and fourteenth (14th) day post due. Consistency will always win over intensity.
Q2: The most effective tool for getting paid on time, which is more effective than assessing a late fee, is to have a "Service Suspension" provision in place. Configuring your system to automatically suspend service delivery or access when an invoice becomes fifteen (15) days past due is the fastest way to get the priority level of the respective payment sky high. The most important touchpoint to reach your goal of timely collection is the seven (7) day pre-due notice. It allows organizations to identify either minor administrative mistakes or misplaced invoices prior to them becoming aged accounts. Atradius reports that roughly 60% of B2B invoices are currently paid late; hence these early touchpoints are critical to staying in business.
Q3: I remember a recent incident of recovering a $12,000 invoice that was months (50+) overdue. The resolution of the problem was not due to extensive negotiations; rather, it was caused by an automated communication triggered based on the system stating the "Account Status is Pending Suspension" and it included a "Click Here to Pay Now" link. The elimination of friction in the payment process, combined with the communication of immediate consequences of non-payment, resulted in timely payment, arriving in the accounts payable department within two (2) hours.
The management of collection activities is fundamentally about establishing the proper expectations for collections and eliminating obstacles in the way of fulfilling those expectations.
Match Pay Cycles Then Phone at Five
I learned this the hard way, but if you set your payment due dates to match when your clients get paid, like around the 20th or 25th, things just run smoother. What really moves the needle is a simple rule: if a payment is five days late, I call them. I did that once for a huge invoice, just asked "hey, is everything okay?" and they paid the next day. For other business clients, a quick call works way better than an automated email or a late fee.
If you have any questions, feel free to reach out to my personal email at admin@trulytough.com :)
