Should we buy receivables software first?

Only after you know which interval is costing you. Software aimed at chasing does little for delay created before the invoice is issued.

How quickly can DSO move?

Issue-speed and accuracy fixes tend to show within one to two billing cycles because they affect new invoices immediately. Behavioural change on existing customers takes longer and is rarely uniform.

Is factoring an alternative?

It converts the same receivables into cash at a cost, and it does not remove disputes or rework. It can be a sensible parallel decision, but it is not a substitute for fixing invoice quality.

AI ROI

Reducing days sales outstanding without hiring a collections team

Where late payment actually originates in a mid-market order-to-cash process, how to price the delay, and which fixes — including AI-assisted ones — pay back fastest.

Miguel Torres, Founder, Merjora · Published 4 September 2026 · Updated 4 September 2026

In short

Most late payment in mid-market companies is created upstream of collections: invoices issued days after delivery, sent to the wrong contact, missing a purchase-order reference, or disputed because the order changed and the paperwork did not. Reducing DSO therefore starts by reconstructing where invoices actually stall, pricing each cause in cash terms, and fixing the two largest — usually invoice accuracy and issue speed — before adding chasing capacity. AI helps mainly with document accuracy, dispute classification and drafting chase correspondence, not with the decision of who to chase.

Key takeaways

Collections effort is the last lever, not the first. Fix issue speed and invoice accuracy first.
Price the delay in cash: average daily receivables tell you what one day of DSO is worth to you.
Disputes are a data-quality problem wearing a finance costume.
Late-payment rules differ by European market; the commercial reality differs even more.

Find where the days are actually lost

Break the cycle into measurable intervals and measure each one separately. Companies routinely discover that a third of their DSO accrues before the invoice ever reaches the customer — which no amount of chasing addresses.

Delivery or service completion → invoice issued
Invoice issued → invoice received and accepted by the customer's AP system
Acceptance → due date (your terms, and whether they are actually applied)
Due date → payment, split by disputed and undisputed
Dispute raised → dispute resolved

The recurring causes in mid-market order-to-cash

Cause	Symptom	First fix
Invoicing waits for a manual monthly run	Uniform delay across all customers	Move to issue-on-completion for the largest customers only
Missing PO or cost-centre reference	Invoices silently rejected by the customer's AP portal	Validate required references at order entry, not at invoicing
Order changed after quotation	High dispute rate on specific accounts	Make change orders a recorded step with a confirmation
Invoice reaches the wrong contact	Long silence, then 'we never received it'	Maintain AP contact and channel as master data, verified annually
No consistent follow-up before due date	Payment behaviour varies by who owns the account	A fixed pre-due and post-due sequence, applied to everyone

Cause, symptom and the fix that usually pays back first

Pricing the improvement so finance accepts it

One day of DSO is worth roughly your average daily credit sales in released cash. Multiply the days you expect to remove by that figure to size the one-off working-capital release, then value the ongoing effect as the financing cost of that cash at your actual borrowing rate — not at an aspirational return.

Keep the two separate in the business case. The cash release is a one-time balance-sheet effect; the interest saving is the recurring P&L effect. Conflating them is the most common way an otherwise sound receivables case loses credibility.

Where AI earns its place in this process

Extracting and validating references from customer purchase orders so invoices are right first time
Classifying incoming AP correspondence — remittance, query, dispute, rejection — and routing it same day
Matching remittances to open items when the customer pays in aggregated amounts
Drafting escalation correspondence in the customer's language, approved by a person before sending
Flagging accounts whose payment pattern has changed before they become a problem

The European nuance

Payment culture varies materially across European markets, and public-sector and large-corporate customers often impose their own portals, formats and e-invoicing mandates regardless of your terms. Treat compliance with each large customer's intake channel as part of the process design, not as an exception handled by whoever notices.

Where late-payment legislation gives you a right to interest or compensation, decide deliberately whether you will use it. Most mid-market companies decide not to for strategic accounts — that is a valid choice, but it should be a choice rather than a default.

Frequently asked questions

Should we buy receivables software first?: Only after you know which interval is costing you. Software aimed at chasing does little for delay created before the invoice is issued.
How quickly can DSO move?: Issue-speed and accuracy fixes tend to show within one to two billing cycles because they affect new invoices immediately. Behavioural change on existing customers takes longer and is rarely uniform.
Is factoring an alternative?: It converts the same receivables into cash at a cost, and it does not remove disputes or rework. It can be a sensible parallel decision, but it is not a substitute for fixing invoice quality.

Quantify the cash your process is holding

Merjora reconstructs where your order-to-cash cycle stalls and puts a defensible value range on fixing it.

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