Before implementing new initiatives, you must first understand your company&#39;s financial situation. Day Sales Outstanding (DSO) and Accounts Receivable Turnover Ratios (ART) are Key Performance Indicators (KPIs) that provide an overview of your company&#39;s current financial performance.

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<h2>What Is Days Sales Outstanding (DSO)?&nbsp;</h2>

<a href="https://www.maxyfi.com/blog/days-sales-outstanding" target="undefined">Days Sales Outstanding (DSO)</a> is the number of days taking for a company or an organization to recollect or recover the outstanding receivables after credit sales have been made. This technique is used by many organizations to track their Accounts Receivable and this can be calculated by the formula

Days Sales Outstanding = (Accounts Receivables/Total Credit Sales)*No. of Days

<h3>Example with XYZ Company:&nbsp;</h3>

If an XYZ company makes $850,000 in credit sales and $540,000 in account receivables in 40 days, the DSO = ($850,000/$540,000)*18 = 28. This signifies that the company collects receivables in an average of 28 days. Given the company&#39;s payment strategy, this might suggest a low or high DSO.

A lower DSO signifies that the business pays its dues before the credit term, whereas a larger DSO shows that the company collects its rights after the credit period has expired. A higher DSO implies poor collection effectiveness, whereas a lower DSO implies excellent collection efficiency and a sound credit strategy.

&nbsp;

<h2>What Is the Accounts Receivable Turnover Ratio (ART)?&nbsp;</h2>

The <a href="https://www.maxyfi.com/blog/accounts-receivable-turnover-ratio" target="undefined">Accounts Receivable Turnover Ratio (ART)</a> is the average number of times a company collects Accounts Receivable during a day, week, or month. The higher the A/R is the higher the rate of collection efficiency.

Accounts Receivable Turnover Ratio = Net Credit Sales/Average Accounts Receivables

<h3>Example with XYZ Company:&nbsp;</h3>

If a company XYZ has $9,000,000 in net credit sales and an AR of $500,000 at the start of the year and $225,000 at the end of the year, then

AR = ($500,000+$225,000)/2 = $362,500

ART = $9,000,000/$362,500 = 24.8

This suggests that the firm XYZ collects receivables 14 times each year.

Divide 365 by the ART ratio to get the account receivable turnover in days.

&nbsp;

<h2>Reasons to concentrate on DSO and ART&nbsp;</h2>

1. Collection Efficiency: The DSO impacts how quickly clients pay and the efficiency of your collections department.

2. Forecasting Cash Flow: Low DSO values suggest a higher cash flow. you can plan investments based on anticipated cash streams or reinvest the funds to increase sales.

3. Customer Satisfaction: if your customers pay before the due date, you can safely assume that they are pleased with your services and wish to continue working with you.

4. Streamlining Credit Policies: A higher DSO or a lower art is frequently an indicator that your credit standards are lax and that your clients have acquired excessive credit limits.

&nbsp;

<h2>Final Thoughts on Improving Your DSO and ART&nbsp;</h2>

There are several strategies for increasing these essential Accounts Receivable metrics since DSO (Days Sales Outstanding) and ART (Accounts Receivable Turnover Ratio) are the two critical performance indicators that establish your company&#39;s performance metrics. However, implementing <a href="https://www.maxyfi.com/account-receivable/features">Accounts Receivable Automation</a><a href="https://www.maxyfi.com/account-receivable/features"> Software</a> such as Maxyfi is one of the essential things you can do. Maxyfi is an AI-powered automation software that aids in the quick recovery of your company&#39;s accounts receivable and accelerates your cash flow.

&nbsp;

Follow and read our blogs to learn more about the DSO, ART, and other <a href="https://www.maxyfi.com/blog" target="undefined">accounts receivable concerns</a>.

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&nbsp;

This article will explain how the higher accounts receivable turnover ratio indicates higher days sales outstanding of a company. 

High Accounts Receivable Turnover Ratio indicates high DSO

Key Performance Indicators (KPIs) such as Day Sales Outstanding (DSO) and Accounts Receivable Turnover Ratios (ART) give an insight of your company's current financial performance.

Do High Accounts Receivable Turnover Ratios Indicate High DSO?

Challenges :

<ul>
	<li>
	Time-consuming manual collection processes
	</li>
	<li>
	Less visibility due to the lack of a centralized database
	</li>
	<li>
	Irregular following-up system leading to slow/no payments
	</li>
</ul>

&nbsp;

The Solution &ndash; Maxyfi

<ul>
	<li>
	30+ Hours saved weekly with Automation collection methods
	</li>
	<li>
	42% increased efficiency; one platform for all data, metrics, and reports
	</li>
	<li>
	20% faster collections using automated reminders and customizable communication templates
	</li>
</ul>

&nbsp;

<h3>Overview.</h3>

Keeping track of every client&#39;s payment status in the AR/collection process was done manually. Derek Yohom, Head of the Credit Control and Collections Team at Banyshop, recounts how the team would create a spreadsheet for each account with all the information such as contact info, invoices, payment statuses, as well as notes on any important detail from a follow-up call done with a collector.

Every time a collector needed to follow up with a client, they had to sort through the labyrinth of spreadsheets to get information on the client and make notes on the same spreadsheet when the follow-up action was completed.

Similarly, the team in other branches of the office did the same in following up with their clients to collect the receivables. This manual process made it all the more labor-intensive and time-consuming for the team, especially when they had to touch every client on board. Overall, the follow-up system was irregular and inconvenient, resulting in delayed payments and poor revenue for Banyshop.

The lack of a centralized database system also paved the way for less visibility and transparency. It even made it difficult for the team members to work remotely because of the pandemic. It became hard to track each other&#39;s activity and maintain accurate records anymore.

&quot;We couldn&#39;t keep track of the accounts that were followed up, or actions taken and the notes were of little to no help. Working remotely was stressful since we didn&#39;t have much access to the resources needed to help with the collections process. We lost a lot of time going through all the spreadsheets individually because there was no centralized system to access the data and work collaboratively,&quot; says Tina Haddins, Collections Team Member at Banyshop.

Soon after the pandemic, they realized that they needed an effective solution that would discard most of their manual work since they needed to spend a lot of time getting back their revenue on track to save the business from recession.

Banyshop recognized the impact of moving to an automation solution that would allow them a centralized collections management system and reduce the manual work significantly.

&nbsp;

<h2>Transforming Accounts Receivable Automation with Maxyfi&nbsp;</h2>

After switching to Maxyfi, the Collections team at Banyshop has been able to save ample time by automating most of the collection work. With a consolidated view of all the client information and a centralized system of <a href="https://www.maxyfi.com/">accounts receivable automation</a> data, they no longer have to rely only on Excel spreadsheets to access information.

The cloud platform allows them to easily access all the invoices, payments statuses, past follow-up actions, communications, and even notes in one place, from anywhere. This improves the team&#39;s efficiency since they can now easily pick up from where they left off and ensure that all the clients are followed up to collect payments on time.

Maxyfi has saved over 30+ hours weekly on manual activities and improved 42% of the collections process efficiency, as well as increasing visibility with the help of real-time data, insights, important metrics, and reports on the dashboard.

Tina says that they have been able to make maximum use of the <a href="https://www.maxyfi.com/account-receivable/features">accounts receivable automation software</a> and features, providing them with a suggested workflow that supported them in improving their collections strategies for better cash inflow. The automated reminders helped a lot since all they needed to do is set up the follow-up schedule and let Maxyfi do the work.

The team found the customizable communication templates an unexpected and added benefit to Banyshop since it saved them a lot of work and resources writing personalized and effective emails/SMS. Tina explains that these templates have been very effective in their purpose, and they have been able to persuade every customer effectually and thoughtfully.

It has also helped them boost their collections cycle, with a 20% significant increase and improvement to the DSO as well. Maxyfi has enabled them to work collaboratively from anywhere, on one cloud platform, and follow up with every customer to keep the cash flow coming in.

&nbsp;

A detailed case study on how Banyshop automated its accounts receivable collections and reduced its manual work.

Banyshop reduced manual work by automating AR collections

Banyshop's team recalls creating a spreadsheet for each account with all the information such as contact information, invoices, payment statuses, and notes on any important detail from a follow-up call with a collector.

How Banyshop Transformed Their AR/Collections Process & Reduced Manual Work

Challenges :

<ul>
	<li>
	Time-consuming, manual dunning processes
	</li>
	<li>
	Collections and workflow management limitations
	</li>
	<li>
	Slow/delayed payments, average DSO of over 3 months
	</li>
</ul>

&nbsp;

The Solution &ndash; Maxyfi

<ul>
	<li>
	35% decrease in manual activities
	</li>
	<li>
	Automated workflows and custom features for efficient collections
	</li>
	<li>
	20% reduction in DSO
	</li>
</ul>

&nbsp;

<h2>Overview - Zattag Accounts Receivable Management</h2>

Like many organizations, Zattag accounts receivable management was mostly manual, performed using Excel and other word processing documents. With one person managing the entire team and overseeing the collection activities, it was also important to ensure a superior customer experience for the growing customer base.

With Zattag&#39;s significantly growing client base, it was hard to keep track of the accounts receivable and the DSO kept surging until they lost control. Delilah and her team knew that it would be impractical to keep the growing accounts receivable in check solely with manual processes, especially when they had to deal with a high delinquency rate and DSO.

&quot;The DSO was at an all-time high, with the average being over 3 to 4 months and we were nearly hopeless about reducing it and dealing with the impending delinquent accounts at the same time.&quot;

Between managing collections, making sure to follow-up with every customer, performing credit checks, reporting and cash application, Delilah Jones, AR Manager of Zattag was looking for a way to scale efficiently.

&quot;The way our client base was growing, we knew we had to find a way to enhance our AR/process since it would become more difficult with manual work&quot;.

How did Zattag then improve its AR/collections process, reduce DSO, and enhance customer experience while increasing its revenue?

Enter Maxyfi, the simplest and most efficient <a href="https://www.maxyfi.com/about">AR Automation software</a> ever.

&nbsp;

<h2>Accounts Receivable Automation With Maxyfi and Decreasing DSO&nbsp;</h2>

Given a suggestion to explore automation tools from the higher board, Delilah attended several events and webinars until she came across Maxyfi&#39;s product demo. What made her choose this was how well the software&#39;s features fit into their needs and would deliver all their requirements.

&quot;I came across Maxyfi through a hunt on <a href="https://www.maxyfi.com" target="undefined">Accounts Receivable Automation</a> tools and signed up for the demo. Though they were new to the market, what excited me was how they had most of the features for optimum AR/collection and management. Maxyfi seemed to be the perfect tool to help us scale efficiently.&quot;

&quot;Along with the features, it also fit within our budget constraints, which gave us an extra push to give it a try,&quot; adds Delilah.

Implementing the software was a breeze, as the team at Maxyfi guided Delilah and her team throughout the setup and process. Once they got the gist of all the features, it was simple for Delilah and her team to take care of it all, from collection to communicating with customers.

Soon they realized that they had to enhance their collection strategies as well to fit into their business goals of catering to the growing clientele. With the help of industry-leading workflows that Maxyfi has provided, they have been able to improvise their collection methods and actively follow up with every customer regularly, elevating their cash flow growth overall.

&quot;From struggling to keep track and follow up with each customer once in a while to now sending personalized follow-up emails regularly, I feel we&#39;ve achieved a sense of liberation and productiveness. Overall, it has helped us become more efficient and consistent in our work.&quot;

With Maxyfi, Delilah and her team have been able to reduce 35% of their manual tasks, saving them time and improving work productivity. Delilah has been able to focus more on critical tasks given the extra time and has a more &quot;hands-on approach&quot; to leadership.

Soon, they were able to note a significant <a href="https://www.maxyfi.com/blog/days-sales-outstanding" target="undefined">decrease in the DSO</a> while they handled delinquent accounts effectually and ensured payments were made within the due time allocated.

&quot;In a short period, we had the DSO reduced by 20%, from an average of 3 months to less than 30 days now. Automating with Maxyfi has changed our AR/collections game!&quot;

Delilah and her team have also received great feedback from the board and customers as well. Their customers are thoroughly satisfied with the experience, being able to view their invoices and statements and communicate easily through the portal.

Maxyfi has simplified the AR/collections process for Zattag by minimizing manual work and enabling a streamlined collections cycle while communicating with customers effectively.

A detailed case study on how Zattag automated its accounts receivable collections and reduced its DSO by 20%

Zattag reduced its DSO by 20% through A/R Automation. 

Zattag's accounts receivable management was primarily manual, with Excel and other word processing documents being used. The Zattag's DSO has decreased significantly since automating with Maxyfi.

How Zattag Revamped Its Accounts Receivable Strategy And Reduced DSO By 20%

Challenges :

<ul>
	<li>
	Manual Work Creating More Risk Of Errors
	</li>
	<li>
	Less Visibility Into Data, Poor Auditing &amp; Reporting
	</li>
	<li>
	Inflated DSO and More Delinquent Accounts To Handle
	</li>
</ul>

&nbsp;

The Solution &ndash; Maxyfi

<ul>
	<li>
	Reduced Manual Processes By 40%
	</li>
	<li>
	Increased Visibility With Real-time Data &amp; Instant Reporting
	</li>
	<li>
	Reduced DSO from 90 days to 45 days
	</li>
</ul>

&nbsp;

<h2>How They Managed Accounts Receivable On Bossfield&nbsp;</h2>

Lucas Ebenezer, Chief Finance Officer. BOSSFIELD.

The accounting and finance team at BOSSFIELD was mostly doing all the data entry manually, using spreadsheets and other word-processing documents to track aging, and payments and manage <a href="https://www.maxyfi.com/">accounts receivable</a> overall.

All the data would be crunched and compiled into a network of spreadsheets, which made it quite difficult for the senior officials to gather insights for financial reporting. It was time-consuming and labor-intensive to get a single view by consolidating all the spreadsheets into one, thus making it hard for the financial board as well.

&quot;The team was managing large amounts of data in spreadsheets and I could understand how hard it is to keep track of all the data, especially during critical times. Not being able to view all the data in one place, becomes a struggle for making informed decisions for the team and the board,&quot; says Lucas Ebenezer, Chief Finance Officer at BOSSFIELD.

What followed was another hurdle where they couldn&#39;t get an accurate forecast of the cash flow due to less visibility into the data, which meant poor audits and a weak reporting system.

Even communication and invoicing were done manually. There would be a few people on the team hired to write/type invoices and mail them out. One drawback of this process was that it wasn&#39;t efficient and regular, often time-consuming, and lacked the strong persuasion needed in a dunning mail.

Between managing the finance team, reconciling payments, and ensuring a streamlined cash flow and smooth customer experience, it seemed like a lot on the plate for Lucas. He and the team also had to make sure that the DSO is as low as possible and keep delinquent accounts at bay.

&quot;With all the responsibilities in hand, it can be tedious to ensure that the collections are received on time and delinquent payments are made as quickly as possible by the clients respectively. Besides that, reducing the DSO was another challenge that we had to tackle.&quot;

To manage the AR/collections efficiently, they decided it was time they switched to an automation tool that would also provide them with accurate reporting and an effective follow-up system. With the business growing, it became even more time-consuming and complex to manage the accounts receivable using spreadsheets.

Hence, the search for a suitable tool that would meet all their concerns started. However, they couldn&#39;t find anything out there that would as much as nearly fit their requirements &ndash; except when Maxyfi came into the market.

&nbsp;

<h2>Digitizing <a href="https://www.maxyfi.com">Accounts Receivable Automation</a> Using Maxyfi</h2>

&quot;When I presented our needs to Maxyfi, never did I expect that this would be the solution which perfectly-acknowledged every requirement patiently and kept in touch with the team throughout the setup.&quot;

Shortly after integrating Maxyfi with their accounting books, in their case &ndash; Excel spreadsheets, they were able to get an overview of all their accounts receivable data on the software&#39;s real-time dashboard.

The team has stopped using spreadsheets and manual tracking since they can view all the metrics and generate instant reports in one place. It has now become much simpler for them to perform auditing and assist the higher officials in informed decision-making and financial planning.

Maxyfi allowed BOSSFIELD to reduce 40% of their manual work by automating most of the repetitive tasks and providing increased visibility and transparency into the AR/collection process.

It has also made it efficient to collaborate with the team on one cloud platform and monitor all the collection activities easily, ensuring that they comply with the company credit policies. The software saved a lot of time for Lucas and the team as well, improving work productivity and allowing them to work on other strategic activities better.

Lucas and the team have now been able to focus on high-priority accounts, especially delinquent accounts and top debtors, with the help of Maxyfi. Equipped with industry-leading collection methods and a rigid follow-up system, they have reduced the DSO from 90 days to 45 days, which resulted in an increased cash flow growth of 30%.

A detailed case study on how BOSSFIELD digitized its accounts receivable collections and improved its cash flow rapidly.

BOSSFIELD improved cash flow by digitizing A/R Collection. 

The accounting and finance team at BOSSFIELD was manually entering data into spreadsheets and has now automated its Accounts Receivable process with Maxyfi.

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Do High Accounts Receivable Turnover Ratios Indicate High DSO?

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