38 Days Is too Long to Wait for Payment

The average days sales outstanding (DSO) in 2025 is 38 days. That means you're waiting over a month to get paid for work you've already completed. For a company with $1M in monthly revenue, that's $1.27M tied up in accounts receivable—cash you can't use to grow, invest, or pay bills.

Here's what that looks like in practice: You invoice a customer on day 1, but payment doesn't arrive until day 38. Meanwhile, you're paying your own bills, covering payroll, and funding operations—all while waiting for money that's already yours.

But here's what most finance teams don't realize: slow DSO isn't inevitable. It's a symptom of manual invoice processing, inconsistent collections, and reactive payment follow-up.

The good news? AI-powered accounts receivable automation is reducing DSO to 22 days—a 42% reduction—by automating invoice processing, accelerating collections, and improving customer relationships. Here's how it works and why it matters for your business.

Why Traditional Accounts Receivable Has 38-Day DSO

Before we dive into solutions, let's understand why traditional accounts receivable processes have such slow DSO:

Manual Invoice Processing Creates Delays

Traditional finance teams process invoices manually: data entry, approval routing, email sending. A single invoice might take 3-5 days just to get sent to the customer. Multiply that by hundreds of invoices per month, and delays compound.

The problem: Manual processing means invoices sit in queues instead of reaching customers quickly.

Inconsistent Collections Follow-Up

Traditional collections rely on human memory and manual tracking. Finance teams send reminder emails when they remember, follow up when they have time, and escalate when it's urgent. But there's no systematic process ensuring every overdue invoice gets timely follow-up.

The problem: Inconsistent follow-up means some invoices get paid quickly while others sit unpaid for weeks.

Reactive Instead of Proactive

Traditional accounts receivable is reactive: you send an invoice, wait for payment, then follow up if it's late. There's no proactive communication about payment terms, no early reminders, and no identification of payment issues before they become problems.

The problem: Reactive processes mean you're always catching up instead of staying ahead.

No Visibility into Payment Patterns

Traditional finance teams don't have real-time visibility into which customers pay on time, which are consistently late, and which have payment issues. They discover problems when invoices are already overdue.

The problem: Without visibility, you can't proactively address payment issues before they impact DSO.

How AI-Powered Accounts Receivable Reduces DSO to 22 Days

AI-powered accounts receivable automation eliminates these problems by automating invoice processing, systematizing collections, and providing real-time visibility. Here's how:

Automated Invoice Processing and Delivery

AI agents process invoices automatically: extract data from source documents, route for approval, and send to customers within hours—not days. They handle formatting, compliance checks, and delivery, ensuring invoices reach customers as quickly as possible.

Result: Invoices reach customers 3-5 days faster, immediately reducing DSO.

Systematic Collections Follow-Up

AI-powered systems send automated reminders at optimal intervals: a friendly reminder 3 days before due date, a follow-up on the due date, and escalating reminders for overdue invoices. Every invoice gets consistent, timely follow-up—no exceptions.

Result: Systematic follow-up means fewer invoices become overdue, reducing DSO.

Proactive Payment Communication

AI-powered systems send proactive communications: payment confirmations, receipt acknowledgments, and early reminders. They identify potential payment issues before invoices are due, allowing you to address problems early.

Result: Proactive communication prevents payment delays, further reducing DSO.

Real-Time Payment Visibility

AI-powered dashboards show real-time payment status: which invoices are paid, which are pending, and which need attention. You see payment patterns, identify at-risk customers, and track DSO trends in real-time.

Result: Visibility enables proactive management, preventing DSO from increasing.

What 22-Day DSO Means for your Business

A 22-day DSO means you're getting paid in 3 weeks instead of 5. For a company with $1M in monthly revenue, that's $533K less tied up in accounts receivable—cash you can use to grow, invest, or improve operations.

Cash flow impact: With 22-day DSO, you have cash available 16 days earlier than with 38-day DSO. That's 16 days of cash you can use for growth, investment, or debt reduction.

Customer relationship impact: Faster invoice processing and systematic follow-up actually improve customer relationships. Customers appreciate clear communication, timely invoices, and professional collections—leading to better payment behavior.

Operational impact: Automated accounts receivable frees your finance team from manual processing and collections follow-up, allowing them to focus on strategic work instead of administrative tasks.

Compare to traditional accounts receivable: 38-day DSO means you're waiting over a month for payment. With 22-day DSO, you're getting paid in 3 weeks—42% faster.

The Numbers Don't Lie

Companies using AI-powered accounts receivable automation report:

• 42% reduction in DSO: From 38 days to 22 days average

• 95% invoice processing accuracy: Higher than manual processing's 85-90%

• 70% reduction in collections time: Automated follow-up eliminates manual work

• Improved customer relationships: Proactive communication increases customer satisfaction

These aren't theoretical improvements—they're the standard outcomes when AI automates invoice processing and collections.

How to Reduce your DSO: Getting Started

If you're ready to reduce your DSO from 38 days to 22 days, here's how to get started:

Measure your Current DSO

Calculate your current DSO: (Accounts Receivable / Total Credit Sales) × Number of Days. Track this over 3 months to get a baseline. Most companies find they're at 30-45 days.

Identify Where Delays Occur

Map your accounts receivable process: Where do invoices get delayed? If invoices take 5+ days to reach customers, focus on processing automation. If invoices are sent quickly but payment is slow, focus on collections automation.

Choose AI-Powered Automation

Look for accounts receivable providers that:

• Automate invoice processing and delivery (not just data entry)

• Provide systematic collections follow-up (automated reminders)

• Offer real-time visibility (dashboards, not spreadsheets)

• Maintain human oversight for complex issues

Test with a Pilot

Test AI-powered accounts receivable automation on one customer segment or invoice type first. Measure DSO, processing time, and collections efficiency. Compare to your baseline.

Scale What Works

Once you see results, expand to all invoices. Most companies see 22-day DSO within 30 days of implementation.

Stop Waiting 38 Days for Payment

Slow DSO isn't a necessary evil—it's a solvable problem. AI-powered accounts receivable automation reduces DSO by 42% (from 38 days to 22 days) by automating invoice processing, systematizing collections, and providing real-time visibility.

The question isn't whether AI can reduce your DSO. It's whether you're ready to stop waiting over a month for money that's already yours.

Ready to transform your accounts receivable process? Talk to us about how AI-powered automation can reduce your DSO while improving customer relationships.