Optimize Cash Flow to Improve Your Financial Health
Getting paid faster isn’t just about sending an invoice and waiting for the funds to arrive—it’s about creating a smooth, proactive, and customer-friendly collections process from start to finish. In SaaS, where recurring revenue is king, even small delays in cash flow can add up to major operational strain. The good news is that with the right mix of automation, payment flexibility, and internal alignment, you can dramatically shorten Days Sales Outstanding (DSO) and improve your company’s financial health. From timely invoicing and frictionless payment experiences to empowering your customer-facing teams with billing insight, these best practices will help you get cash in the door faster. Here are ten proven strategies to optimize collections and keep revenue flowing predictably.
1. Send Invoices On Time
This sounds obvious, but many companies don’t send out invoices as fast as they could. Delayed billing slows cash flows. Below are a few example scenarios:
- Billing in arrears for usage-based charges – The rating process to determine line item charges requires manual intervention. Instead of invoices being sent on the 1st day of the month, they are typically sent on the 7th day of the month. The invoice due date is 30 days from the invoice date. Incoming cash flow is delayed by 7 days. A better approach is to automate the collection and rating of usage data so the invoice is generated and sent on the 1st day of the month.
- New customer invoices – The sales team closes business throughout the month. However, the new customer setup and initial billing run process requires manual intervention. It only occurs once per month at the end of the period. A deal that was closed on January 15th is not invoiced until February 1st. Incoming cash flows are delayed by 15 days. A better approach is to automate the handoff of new contracts from the sales team to finance so that invoices can be generated automatically. A new customer contract signed on January 15th, would be invoiced immediately on the 15th or 16th.
2. Let Customers Pay with Cards, ACH, Wires, or Checks
Business customers have different payment channel preferences for SaaS. Some will prefer to set up autopay to simplify recurring billing. Others will prefer to be invoiced so that their and then have their AP department send a payment via check to take advantage of the float.
Offer customers a wide range of payment channels to accommodate their various preferences. Let them pay with credit cards, ACH debit, ACH credit, wire transfer, or paper check. Offer options to pay with digital wallets such as PayPal, Apple Pay, and Google Pay.
3. Make the Payment Experience Effortless
Avoid unnecessary friction in the payment experience. Some best practices include:
- Auto Pay – Allow customers to enroll in autopay for recurring billing so that they require no action to pay the invoice. Their credit card or bank account is automatically charged for each invoice.
- Expired Credit Cards – Don’t harass customers to update expired card numbers for autopay. Pay the extra fees to your bank to obtain new card numbers and expiration dates, and then automatically apply them to payment runs.
- Pay Now Links – Include hyperlinks to hosted payment pages in dunning emails and within invoice PDFs. Allow customers to pay quickly via credit card. Don’t require them to enter a username and password to make the payment. Enable them to link the payment to the invoice in other ways.
- Billing Portal – Make it easy to pay within your product. When users go to the Admin section, allow them to navigate to a hosted payment page or to log in to your billing portal to remit.
4. Arm Customer Support with Billing Details
Empower your front-line workers who talk to customers with the details needed to answer the most common billing questions. Find out which teams get the most billing inquiries – sales, customer success, and technical support.
Enable the customer-facing teams to see customer invoices and the individual line items, so that they can understand the detailed questions users are asking. Arm them with answers to common questions about how line items are calculated, how prorations are performed, and other company-specific billing policies.
5. Incentivize Customers to Pay Early
Offer discounting incentives to encourage customers to pay for annual contracts in advance. Most SaaS companies offer a 15-20% discount for customers who choose an annual plan with upfront payments over a monthly plan with calendar billing. Some SaaS companies offer steeper discounts to encourage customers to pay for multiple years in advance. An enterprise account that is willing to pay upfront for a 3-year contract might enjoy a 30-40% discount on their plans.
6. Get Ahead of Risk With Credit Scoring
Not all customers pay on time—or at all. Using credit risk tools lets you spot trouble before it arrives. Evaluate new customer credit risk before the sales team negotiates payment terms. Monitor credit changes throughout the customer lifecycle. If you see warning signs, take the opportunity to adjust payment terms, ask for deposits, or switch to upfront collections for riskier accounts without killing deals or relationships.
It’s the financial equivalent of bringing an umbrella before it rains.
7. Setup Automated Aging Reports
Invest in a billing or accounts receivable automation system that will track the status of all outstanding invoices. Tracking hundreds of invoices from different accounts with different due dates in a spreadsheet isn’t scalable. Automated aging reports enable you to group invoices or customers by DSO range so that you can see which accounts are 30 days, 60 days, 90 days or 120 days past due. Aging reports also allow you to group by invoice amount. A $100K invoice that is 30 days past due may be a higher collections priority than a $10K invoice that is 90 days overdue.
8. Automate Dunning Communications
Sequence an automated series of email communications to customers for each step in the order-to-cash process. Notify customers when a new invoice is posted. Send them a reminder a few days before the invoice is due. Confirm successful payment transactions. These communications contribute to consistent, on-time payments.
For past-due accounts set up an automated sequence of communications to remind customers of outstanding invoices. Embed links to your billing portal or hosted payment pages to make it easy for customers to settle outstanding balances. Provide instructions on how to update payment method details if the account has an expired credit card number.
Escalate to a wider group of billing contacts at regular intervals. For example, days 1-10 you may limit communications to the primary billing contacts. On Day 11, start to send notifications to end-users as well. Pop-up notifications in your SaaS application when users log in to notify them of outstanding balances.
9. Tie Commissions to Collections
Ensure your commission policies link payouts to customer collections. Sales reps shouldn’t be getting paid before the company does. Aligning commissions with collections helps incentivize the sales team to work with the customer to ensure the invoice gets paid. It also provides risk mitigation to discourage sales from making bad deals in which the customer cancels in the first few weeks of a contract.
The same policy should apply for renewals and upgrades with customer success. Although, the commission percentages for deals with existing customers are typically smaller, the total amount of collections is much larger. As SaaS companies grow more and more of the revenue is generated from the current account base versus new logos.
10. Tackle Billing Disputes Head-On
Disputes lurk in the shadows of every SaaS finance team. Left unattended, they stall payments and stretch DSOs into eternity. Centralize your dispute management with automated workflows, assign cases promptly, and keep communication clear and logged.
The payoff? Faster dispute resolution and a CFO who finally sleeps well at night.
SaaS Takeaway
DSO is a team sport. Automate what you can, remove friction where it counts, get ahead of risk, and resolve disputes efficiently. Done right, it’s less a grind and more a strategic advantage that turbocharges cash flow and frees up capital for growth.
Frequently Asked Questions
What’s a good DSO for SaaS?
Aim for 30 days or less, but many SaaS firms hover between 30 and 45 days.
How quickly will automation show results?
Often within one or two billing cycles—fast enough to make your CFO smile.
Is usage-based billing a DSO risk?
It can be if customers don’t understand their bills. Invest in education directly with customers and frontline staff to mitigate the risks.
