Shrink Your DSO: Expedite Your Accounts Receivables & Get Paid Quicker

Transportation providers need to optimize more than their capacity.  As asset utilization and driver retention are key to mitigating losses under current market conditions, so is shrinking your days sales outstanding (DSO). 

The drama of current events shouldn’t be an excuse for not holding your accounts receivables (AR) department accountable; our experts advise that the opposite should be the case. The logistics ecosystem is subject to the ripple effect of policy changes and global health crises; therefore, to protect your cash flow,  your back office operation needs to be a tight ship that can withstand volatility and maintain timely payment from your customers.

Here are a few ways to slash your DSO with an expedited, money-generating AR process, regardless of what impacts the global supply chain.

1. Play Offense. Establish a Proactive System to Take Control of Receivables

You’ve heard it before, “Complacency kills.” Your AR department is no exception. Instead of waiting for money to come to you, you must take every step proactively to retrieve that payment as quickly as possible.

For example, some shippers may report not receiving freight bill information. If this happens to you, your employees must end the customer's call, dig through manual records, and send the bill again. At the least, this process adds another seven days outstanding to an already delinquent account.

By proactively standardizing your billing process throughout your AR and automating key steps,  you can avoid this and many other payment-delaying scenarios from occurring. Inquiries will not only be resolved quickly, but their sheer volume will drop significantly, signaling happier customers and faster payment.

In addition to immediately realizing a shorter DSO, the steps you take to streamline documentation management - from customer information validation and bill of lading creation to payments, POD retrieval, and more - will give you scalability and elasticity. As a result, you become agile and ready for changes that lie ahead (predicted or not). 

You can do this with technology or work with your operations director to re-map your processes. Cut out unnecessary steps and standardize sequences.

Expert Tip: Pay extra attention to compatibility. Whether you’re considering a new technology to add or simply a new workflow, make sure it connects seamlessly into the system you want (not just the one you have).

2. Get Your Data Right the First Time to Get Paid On Time

Carriers and 3PLs must prioritize the accuracy of their data output to get paid the right amount, on time, every time. Even with a proactive approach to your back office, organizations can’t curtail DSO if the information on your bills is incorrect. According to our experts, you should be shooting for 98.5% accuracy or higher on your bills of lading.

Beyond ensuring proper and timely payment for your services, accurate data provides unique visibility into business performance and even gives you the ability to track and trend your customers’ payment behavior and offer early payment incentives with confidence in the ROI, with predictive modeling using innovative technologies, you’ll improve forecasting precision and stay on top of rapidly changing trends in an unstable market. 

You’ll be able to discover new avenues for revenue, increase your profit margins, and collaborate better with partners. Moreover, reliable, real-time data will empower your team to optimize their organizational functions.

Expert Tip: You must put good data in to get good data out. Check out this guide on leveraging rate audits to ensure your accounts receivables balance is accurate and you aren’t leaving money on the table.

3. Lean On External Resources to Scale Quicker

In today’s transportation market, most carriers and 3PLs don’t have the time, capacity, or subject matter expertise in-house to fuel a high-performing, well-oiled accounts receivables machine. In fact, according to this recent FreightWaves article, an increasing number of transportation providers are turning to business process outsourcing specialists to help improve their DSO ratio.

When you embrace the staff on-demand concept, you will immediately notice: 

• More efficient production thanks to around-the-clock processing (if leveraging offshore professionals)
• Resource elasticity and accelerated service delivery with shorter recruitment lead times for the best talent and skills
• Exponential cost savings that you can pass on to your customers due to your dwindling overhead costs (and protection against market fluctuations that often impact labor wages, healthcare premiums, and more)

Business process outsourcing (BPO) is more than labor arbitrage. When you find the right BPO partner for your business, you can transform your back office operation into a top contributor to your bottom line. While you focus on your core business and simply being the best service provider to your shippers, your BPO partner will immerse itself into your daily processes, pinpoint the root causes of your issue, and create a solution that catalyzes future growth.

Expert Tip: Rest assured of your partner’s expertise and ask for their input throughout your operation. For example, by integrating their tech recommendations in respective areas of your back office, your partner will quicken your cash flow and strengthen your client retention thanks to higher accuracy rates and faster processing time.