Cash flow is oxygen for a business. No matter how strong your sales are, poor cash flow management can lead to trouble surprisingly quickly.
Key to maintaining strong cash flow is keeping your days sales outstanding (DSO) in check. Lingering receivables tie up your working capital, making it harder to pay bills and invest in growth. Think of it this way: unpaid invoices are basically interest-free loans for your customers. With interest rates up more than 5% in the last few years, that frozen cash is more expensive than it’s been in a long time.
Fortunately, a high DSO is usually a preventable problem. Most delays come down to avoidable issues like:
- Invoices sent to the wrong contact
- Outdated customer details
- Simple billing errors
- Forgetting to contact your customers.
The last of these tends to be the most overlooked—it can be easy to miss the right moment to reach out, or feel overwhelmed by the sheer number of accounts to manage.
AI assistants are built to help humans identify issues and triage them faster to prevent delays. With their help, you can lower your DSO while creating a smoother, frustration-free experience for your customers.
Why aren’t your customers paying on time?
It’s probably not because they don’t want to—despite what you might think, most customers want to settle their invoices promptly. When they don’t, it’s usually because of breakdowns within the order-to-cash process. For instance:
- The wrong invoice was sent.
- Adjustments for changes in goods or services were never made.
- A new billing contact wasn’t updated in your system.
- Invoices ended up in the wrong inbox, or worse, no inbox at all.
- Partial payments were made, but no revised invoice followed.
- The customer didn’t even know an invoice was due.
Sound familiar? Unfortunately, these issues have a tendency to compound on one another, pushing your DSO higher and higher.
The cost of late payments
Delayed payments are a widespread issue affecting businesses of all sizes. In the U.S., less than half of all invoices are paid on time, leading to a ripple effect of cash flow problems that reverberate across an organization.
When cash flow stalls, basic expenses like payroll, rent, and utilities can become difficult to manage. Growth plans might be put on hold. Many businesses turn to credit lines or short-term loans to bridge the gap, racking up interest and fees that chip away at margins.
All of this is particularly frustrating for finance teams. They’re forced to spend an average of 14 hours per week—nearly two full workdays—chasing down late payments and resolving invoice discrepancies. Nobody likes this kind of work; it’s a drain on resources and morale.
It’s an even bleaker picture for small businesses. On average, they receive payments eight days later than the agreed-upon terms. With smaller cash reserves to fall back on, these delays can quickly turn into larger financial challenges.
Why these issues persist
Late payments don’t occur in a vacuum. They’re often symptoms of deeper operational gaps, like:
Customer account changes
Details like billing contacts, payment methods, or updates to orders are in constant flux. If your team isn’t staying on top of these changes, it’s only a matter of time before something important slips through the cracks.
Data silos
Customer information is often spread across multiple systems: CRMs, ERPs, order management tools, and more. When data is fragmented like this, it’s nearly impossible to maintain a single source of truth.
Disconnected teams
Finance, sales, customer service, and account management often operate in isolation, with limited visibility into what each other is doing. Without consistent communication, critical updates get lost in the shuffle. Worse, this lack of coordination can lead to duplicated efforts or incomplete tasks, further bogging down the process.
The good news is that just about all of these issues are fixable with the help of AI assistants. These tools help break down silos by coordinating follow-ups and ensuring everyone has the information they need to act fast. They also bring scattered data together from different systems, giving your team a clear, unified view of every account.
How AI proactively solves issues that increase DSO
AI assistants are proactive problem-solvers that can do much of the heavy lifting required to bring down DSO. They’re a big reason why, according to PYMTNS, “more than one-third of middle-market firms already leverage AI for at least half” of their AR and AP processes, 47% of which are “less likely to report high levels of uncertainty in their operations.”
Here’s how these agents work their magic:
Invoice discrepancy resolution
A simple typo or two is all it takes to throw your entire payment cycle off track. Incorrect billing addresses, misapplied discounts, and missing purchase order numbers delay payments and leave customers feeling frustrated.
AI assistants are great at identifying discrepancies like these before invoices are sent. They automatically cross-check invoice details with customer contracts, purchase orders, and prior transactions to flag potential mistakes ahead of time.
When the occasional error does inevitably slip through, AI assistants act as an early warning system. For example, if an invoice bounces back because of an invalid email, the system instantly alerts your AR team to take action. Doing so prevents these issues from snowballing into major delays.
Internal collaboration
AR isn’t just the finance team’s responsibility. Payment disputes, order clarifications, and account updates often require input from sales, customer service, or account management. The problem is, these teams rarely share the same tools—or even the same priorities.
AI assistants can help bridge these gaps. Let’s say a customer disputes a charge because they believe a discount wasn’t applied. The AI assistant can automatically pull up the contract, verify the terms, and notify the sales rep to clarify or confirm. No back-and-forth emails or phone tag required—just a swift, coordinated response.
Cash application efficiency
If you’ve ever tried to match a payment to an invoice with incomplete remittance details, you know how frustrating it can be. Between ACH transfers, wire payments, and checks, it’s no wonder AR teams spend countless hours reconciling accounts.
AI assistants make this process faster and smoother. They can pull key details from unstructured sources like emails or PDFs and link payments to the right invoices, even when the data is messy. For example, if a customer sends a bulk payment without clear remittance instructions, AI can analyze the payment amount and past transaction patterns to allocate funds correctly.
Even in cases where invoice numbers are missing, AI takes the guesswork out of matching payments by predicting likely connections based on customer history.
Real-time account updates
In AR, knowing the status of an account, a payment, or an invoice can mean the difference between resolving an issue quickly or letting it spiral into a larger problem.
AI assistants deliver real-time updates on every account, so your team always has the latest information at their fingertips. Late payments, partial transactions, or emerging patterns are flagged immediately, giving you a clear view of what’s happening and what might be around the corner. Even better, AI can predict which accounts are most at risk of default, giving you the opportunity to take proactive steps before an issue arises.
The path to faster payments starts here
Late payments and high DSO don’t have to be the norm. With modern tech, outdated customer details, scattered data, and a lack of coordination across teams all become fixable problems.
AI assistants are designed from the ground up to tackle these kinds of efficiencies head-on. They can catch mistakes early, keep your team connected, and streamline workflows, keeping your cash flow in good shape while freeing up your staff to focus on more high-value work.
Let’s get you paid faster. Contact Stuut today and see how our AI-powered solutions can simplify your AI process and reduce your DSO.