With average days’ sales outstanding of 44.5 days, US companies could see vast improvements in their receivables processing, according to a new report from Aite Group. 

Given the need for most companies to make best use of internal liquidity, any solution that can reduce the DSO cycle—which establishes how long it takes for companies to collect on invoices—is of value. Looking externally for a solution that can shorten processing times and reduce errors or exceptions that would normally extend the payment cycle may be a worthwhile investment.

The survey of 80 senior receivables and treasury managers in the US with annual revenues of $1 billion or more found that a big part of the problem is continued manual intervention in data transit.

About half of respondents reported that they still require manual data input somewhere along the receivables chain—within processing and payments or to post to internal accounting systems.

Each extra hand on the chain increases time outstanding and also increases the likelihood of error.

Explains report co-author and Aite Group senior analyst Nancy Atkinson: “Faced with the large and growing number of channels by which payments are received, variety of payments types and the complexity and application of data, nearly 60 percent of respondents see room for improvement in their company’s receivables and cash application processes.”

The problems stem from internal staffing issues, inadequate or underused technology, and the weak economy driving customers to try to extend payment terms as much as possible, according to respondents.

Aite Group suggests that new technology from banks and vendors in the receivables space can help improve STP and reduce some of these issues.

Although improving receivables technology cannot help improve the economy, it can help speed up processing time, help companies to keep customers to agreed payment terms, and minimize bottlenecks due to exceptions or errors.