A new study, based on an exclusive survey by The Kaplan Group, provides a comprehensive analysis of payment collection challenges, focusing on companies affected by high and very high Days Sales Outstanding (DSO). 

Our research spans multiple industries, including manufacturing, retail, professional services, and healthcare.

The survey gathered insights into revenue distributions, industry-specific trends, and the impact of delayed payments on cash flow management.

These insights were gathered from 100 finance leaders—CFOs, VPs of finance, directors of finance, and controllers—at companies ranging from under $10 million in revenue to over $1 billion.

Key Takeaways from the Survey

• Only 14% of companies have a DSO under 30 days, while 42% experience DSO over 46 days.
• Larger companies tend to face higher DSO, with 70% reporting DSO above 46 days.
• High DSO significantly disrupts cash flow cycles and financial planning

Cash flow is the lifeblood of any business, yet many companies are struggling with delayed payments, leading to weakened liquidity, increased costs, and limited growth.

Revenue Distribution Patterns

Our analysis revealed a startling data point: while only 14% of companies maintain a DSO under 30 days, a significant 42% are grappling with DSO exceeding 46 days.

We found a correlation between the revenue size of companies and their associated DSO segments. 

• Smaller companies tend to report a higher proportion of invoices settled within 30 days.
• Larger companies often face significantly extended DSO values, with 70% of respondents reporting a DSO higher than 46 days. 

Companies with very high DSO (over 90 days) exhibit a pronounced shift, with a substantial portion of their revenue tied up in late payments. 

• This suggests that as companies grow larger, their credit and collection challenges increase.
• This may be due to more complex customer relationships, extended credit terms, and an expanded customer base.

Industry-Specific Trends

Not all industries are affected equally by high DSO challenges. 

The survey uncovered that industries such as healthcare, manufacturing, and professional services experience distinct issues in payment collection. 

• Healthcare companies showed considerable exposure to very high DSO, with three-quarters of respondents reporting DSO higher than 46 days. 
• This result can be attributed to the extended billing cycles, insurance complexities, and regulatory delays inherent in the industry. 

Manufacturing firms, especially those engaged in international trade, face similar challenges.

• This is due in part to differing payment norms and liquidity constraints, leading to a greater spread in their DSO distributions. 

In the manufacturing sector, high DSO often reflects broader supply chain pressures and challenges in inventory financing. Addressing these payment delays is critical for maintaining smooth operations and sustaining profitability.

Impact of Late Payments on Cash Flow and Financial Planning

Delayed payments have a direct impact on cash flow, affecting a company’s ability to manage day-to-day operations and strategic planning. 

The survey indicates that companies with high and very high DSO encounter substantial disruptions in their cash flow cycles. 

• The increase in late-stage collections, illustrated by a higher percentage of invoices falling in the 61-90 days and over 90 days brackets, could lead to significant liquidity issues.
• This hinders effective financial planning, forcing companies to consider alternative financing avenues and maintain higher working capital reserves to buffer the cash flow gaps.

Interestingly, companies that keep a DSO under 30 days could also be put under pressure by late payments. 

• 29% of respondents in this category report a significant to critical impact on their cash flow planning.

Preventive Measures and Their Influence

Preventive measures play a critical role in reducing the incidence of late payments. 

The survey results reveal that companies with stringent credit management policies, proactive invoice tracking, and early detection mechanisms are more successful in containing DSO levels.

• On average, companies with a high DSO are using a less diverse arsenal of preventative measures. 
• Respondents with a DSO higher than 90 days are almost exclusively relying on regular payment performance reviews (80%) and clear payment terms in contracts (60%).

A striking revelation from our survey was the limited arsenal of preventive measures used by companies with very high DSO. Those with DSO exceeding 90 days primarily rely on just two strategies: regular payment performance reviews and clear payment terms in contracts. This narrow approach may be a key factor in their prolonged collection cycles.

While many businesses have started incorporating digital solutions for invoicing and payment tracking, there is still considerable room for improvement. 

• The findings emphasize that preventive strategies, when effectively implemented, can mitigate the risk of late payments and improve overall cash flow stability.

Recommendations for Improving Collection Rates

Based on the survey insights, companies, especially those with high DSO, can benefit from several strategic interventions. 

• For invoices that are in the early stages (1-30 days past due), businesses found automated payment reminders via email or text (52%) most effective.
• At the mid-stage (31-90 days overdue), payment plans (50%) emerged as the top method for recovering payments.
• When invoices become significantly overdue (90+ days), payment plans (51%), collection agencies (50%), and legal action (50%) proved equally effective.
• Implementing structured, multi-channel collection strategies tailored to the stage of invoice delinquency can substantially reduce the impact of late payments and improve overall cash flow.
• Clear communication and incentives for prompt settlements remain beneficial across all stages.

The study highlights that high and very high DSO pose significant challenges, affecting revenue realization, cash flow management, and overall financial planning. 

By rigorously analyzing DSO trends, businesses can transform late payments from a liability into actionable insights that drive strategic improvements across the organization.

Companies that experience prolonged payment delays must reassess their collection practices and adopt proactive measures to alleviate the risks associated with late payments.

• Implementing a combination of advanced digital invoicing tools, clear credit policies, and targeted collection strategies will improve collection rates and enhance operational liquidity and long-term financial stability. 

In summary, addressing high DSO should be a strategic priority for companies seeking to strengthen their financial resilience.

Methodology

This study employed a targeted data collection approach focusing on financial decision-makers across multiple industries and company sizes. 

• The survey was distributed to Chief Financial Officers, VPs of Finance, Finance Directors, Controllers, and other positions which possess direct oversight of their organizations’ collection processes and cash flow management. 
• In total, 100 respondents completed the comprehensive questionnaire in February 2025, representing a diverse cross-section of the business landscape. 
• The respondent pool included companies ranging from small enterprises with annual revenues under $10 million to large corporations exceeding $1 billion in yearly turnover.

The survey instrument was designed to capture both quantitative metrics and qualitative insights regarding payment collection practices. 

• Respondents provided detailed information about their invoice aging, collection success rates, and the financial impact of delayed payments. 
• The questionnaire included sections on collection methods, preventive measures, and the resources allocated to managing accounts receivable

The cornerstone of our analysis was segmenting the data by Days Sales Outstanding (DSO) into five meaningful categories: Under 30 days, 31–45 days, 46–60 days, 61–90 days, and over 90 days.

This approach revealed distinct patterns, particularly for companies with high and very high DSO, and provided a foundation for targeted recommendations tailored to their unique needs.

This segmentation allowed us to isolate and examine the specific characteristics, challenges, and strategies for companies facing varying levels of payment delays. 

We conducted comparative analyses across company size, industry, and geographic location, employing statistical techniques to uncover significant correlations between DSO levels and business attributes.