Days Sales Outstanding (DSO) is a key metric that indicates how long it takes your business to collect an invoice on average. It can affect every aspect of your operations. If your DSO is high, you’re likely losing money on carrying costs and inefficient processes, and that means either reducing services or passing those costs onto consumers.
Many companies view DSO as a back-end metric that measures how quickly payments come in, but that’s only part of the puzzle. Invoicing speed can have a big impact on the front end as well, and that’s why it’s critical to optimize every aspect of your order-to-cash (O2C or OTC) cycle. After all, if you can’t get your invoices out rapidly, it doesn’t matter how fast Accounts Receivable (AR) collects – you’re still too slow on the draw.
Fortunately, there are several great ways to optimize your O2C cycle to make sure there aren’t any hitches in your cash flow pipeline. Here’s everything you need to know about perfecting your billing process so you’re never a day late or a dollar short.
Breaking down invoicing
Subscriptions and recurring revenue models can represent an extreme invoicing challenge that digital businesses need powerful tools to manage. Each of the following actions is a potential bottleneck for manual invoicing processes that directly impacts DSO on the front end.
1. Initial contract
Formulating the initial contract might seem simple enough, but even this common process can set the stage for inefficiencies and downstream issues. For instance, if your team is inputting customer data manually to NetSuite, you’re already losing time and potentially gaining errors in the process.
2. Managing monthly billing
Many factors can impact the complexity of monthly billing challenges depending on your business model. Whether it’s subscription services, usage-based billing, or another recurring billing scenario, every manual process can slow you down, introduce errors, complicate workflows and inflate your DSO average.
3. Contract amendments
Many systems use a de-booking/rebooking process to amend contracts. It’s bulky, time-consuming and complicates the books – especially if it’s being done by hand.
4. Invoice customization
Managing consolidated invoicing becomes increasingly complex when customer hierarchies are involved. Differences between contracting and billing structures, varying tax calculations and the need to generate multiple invoices based on service lines/usage add layers of difficulty.
Customer hierarchy can also complicate the billing process with variations in contracting vs. billing, how tax is calculated, and multiple bills based on service lines or usage. These factors can significantly delay the invoicing process – especially if they’re managed by hand.
5. Invoice delivery
If you made it this far and your brain and hands aren’t cramped from all the data manipulation and entry, you’re finally ready to send. NOW your back-end DSO process timer starts counting for payment collection. FYI: it’s already way behind your competitors who use ZoneBilling in NetSuite.
Accelerating DSO on the front end
If you’ve currently got an invoicing process in place that works but it’s just very slow, you may already be running into challenges surrounding growth and scaling. Manual processes are often extremely complex, and as your business expands they are often unable to keep pace. If your processes are not optimized, the DSO will only go up.
Fortunately, software integrations that operate entirely within NetSuite can automate several steps of the invoicing process. ZoneBilling extends your ERP’s native capabilities with invoice automation to optimize every aspect of the order-to-cash cycle and deliver a significant drop in your total DSO. To learn more about how ZoneBilling can help boost your business, explore Zone’s Advanced Subscription Billing ROI Calculator.
Here’s a breakdown of how ZoneBilling can accelerate every step of your invoicing process.
1. Automatically input customer information
ZoneBilling streamlines your entire O2C process by tightly integrating your CRM with Zonebilling + NetSuite, automating invoice creation. From the initial contract to amendments, renewals, and even handling complex billing scenarios, this seamless integration ensures that data flows effortlessly between systems. Financial data, such as invoices and payments, is passed back into your CRM, giving your team full visibility into the customer lifecycle. This eliminates manual reconciliation and spreadsheet work, freeing your team to focus on higher-value activities and building stronger customer relationships.
2. Automated mediation and complex rating of usage data
ZoneBilling ensures accurate and timely invoicing by automating the mediation and complex rating of high-volume usage data. It captures, processes and organizes data from usage-based and subscription models, eliminating the need for manual handling. Being embedded in NetSuite ensures that usage data is accurately reflected on invoices, reducing errors and streamlining the billing process. By automating these tasks, your team can trust that invoices are precise and sent out on time, keeping your billing operations efficient and reliable.
This was a huge factor in New Zealand broadband provider Devoli’s ability to overcome the limitations of its legacy billing system. By implementing ZoneBilling, they were able to streamline their data flow and reduce billing time by 80%
3. Streamlining contract amendments
Automating contract amendments from your CRM into ZoneBilling + NetSuite is crucial for ensuring accurate billing calculations, correct prorations and clear invoice presentation to customers. By seamlessly managing contract changes – such as upgrades, downgrades, or swaps – ZoneBilling ensures that amendments are reflected immediately upon invoicing.
This reduces manual errors, accelerates invoice generation and delivers a clear breakdown of charges to the customer. Automating this process not only gets bills out the door faster but also improves customer satisfaction with transparent billing.
Tech Soft 3D was struggling with a cycle of administrative tasks involving multiple contract management challenges. ZoneBilling allowed them to automate their processes and free up a month of accounts receivable work with a more sophisticated billing strategy.
4. Instant invoice customization
ZoneBilling automates invoice presentation by grouping, consolidating, sorting and subtotaling line items based on your predefined criteria. This ensures invoices are formatted correctly and delivered to the correct customer without manual intervention. Your accounting team no longer has to worry about making last-minute adjustments and potentially introducing errors. ZoneBilling streamlines the billing presentation and consolidation, ensuring invoices are accurate, professional and aligned with your specific requirements.
5. Invoice delivery
Finally, once the invoice is ready to go, ZoneBilling automatically delivers it to the customer. There will never be any unpleasant surprises at the end of the month with latent and forgotten invoices sitting in the queue.
End-to-end benefits of invoice automation for DSO
Once your front-end invoicing process is streamlined and automated, your payment collection process will have a huge head start for keeping your DSO as low as possible. Automation solutions have the potential to reduce your DSO by up to five days, and these aren’t just theoretical numbers. You can use Zone’s DSO reduction calculator to begin identifying where and how you can start shortening the time for your business.
For instance, people management platform Lattice was experiencing mounting billing challenges as they transitioned from a startup to a mature business. Their partnership with Zone & Co allowed them to achieve a 90% reduction in billing efficiency. That’s an enormous competitive shift in any business ecosystem.
By operating entirely within NetSuite and extending its native capabilities to optimize your O2C cycle, your business will experience additional benefits beyond just an all-time low DSO.
- Maximize the advantages NetSuite’s Advanced Revenue Management (ARM) module delivers for compliance with ASC 606 regulations.
- Eliminate multiple logins and systems, and minimize reliance on Excel spreadsheets.
- Reduce revenue leakage across every aspect of your business.
Lower your DSO and extend your ERP with ZoneBilling
Businesses will need every advantage to keep customer costs low and augment their services by optimizing order-to-cash cycle metrics like Days Sales Outstanding. It’s easy to focus on back-end processes like payment collections to reduce DSO, but the complexities of front-end activities like invoice creation can actually have a much bigger impact on your cash flow.
ZoneBilling is a powerful tool that extends NetSuite’s capabilities so your accounting team can maximize their efficiency, scale for new billing models as your company evolves, and keep your business’s revenue flowing. Learn more about how Zone’s solutions can streamline every aspect of how your business leverages its ERP.
