Days Sales Outstanding (DSO) is a measurement that remains a key performance indicator for large and small suppliers alike. Whether a company’s DSO is one day or 90 days, each day is critical. It costs the supplier money every day the invoice remains outstanding (see our blog When Should Your Company Take Advantage of Early Invoice Payment? where cost is discussed in more detail). One of the most important benefits offered to suppliers by third-party e-Invoicing networks is the ability to reduce DSO. While it’s true that submitting invoices electronically can have a significant impact on DSO, some e-Invoicing networks do a better job than others at helping suppliers get paid faster.
The high and the low
Based on our 2021 Perceptions Analytics study on e-Invoicing, one e-Invoicing network stands above the rest at reducing DSO for suppliers. Of the suppliers that participated in our study, 67.1% indicated that this particular e-Invoicing network is very effective at reducing DSO. The e-Invoicing network at the opposite end of the scale had 50% of suppliers indicating they were very effective at reducing DSO.
Effectiveness scores can fluctuate once you begin to add filters to the overall responses. For instance, regarding organizations with annual invoice submission volumes of 25,000 or more, suppliers found that using a third-party e-Invoicing network was very effective at a rate of 63.4%. For suppliers who had an annual invoice volume between 51 and 100, 53.1% of respondents indicated an e-Invoicing network was very effective at reducing DSO.
A noticeable difference between larger and smaller companies
A similar variance also exists between larger and small organizations. Our study shows that 75% of organizations with annual revenue over $50 billion indicated that an e-invoicing network was very effective at reducing DSO. In comparison, only 31.7% of organizations with revenue of less than $5 million found e-Invoicing networks to be very effective at reducing DSO.
While annual invoice submission volume appears to be a factor indicating the effectiveness of reducing DSO, annual revenue seems to be more of a contributing factor. With that said, revenue and invoice volume are not the only factors contributing to the effectiveness of e-Invoicing networks’ ability to reduce DSO.
Industry sector has some influence on how effective suppliers find e-Invoicing networks at reducing DSO. The industries that find e-Invoicing networks to be very effective at reducing DSO are hospitals/medical/health services at 73.9% and industrial services at 73.3%. The industries where fewer respondents find e-Invoicing networks to be very effective are media/entertainment at 40% and construction and consulting, tied at 48.1%.
This data, and other performance data regarding individual third-party e-Invoicing network providers, is available via our Perceptions Analytics interactive dashboard. We asked hundreds of supplier organizations representing different industries, revenue sizes, and invoice volumes to participate in our study. Our painstakingly complex process enabled us to score the top third-party e-Invoicing networks in many order-to-cash areas, including invoicing, payment, and more. Start your free trial today and discover how the top third-party e-Invoicing networks scored in areas that are important to you.
Ernie Martin is Founder and Managing Director of Receivable Savvy. He brings over 25 years of experience in financial supply chain management, marketing and communications and draws upon his extensive experience to share knowledge and best practices with AR professionals. He currently chairs the Vendor Forum of the Federal Reserve Bank of Minneapolis and his resume includes time at several well-known brands and companies such as Tungsten Network, Delta Airlines, CIGNA Healthcare and Georgia Pacific as well as a number of years as an independent consultant.
