- Successful businesses have dependable cash flows, and the DSO metric is the best way of gauging the health of a company’s cash conversion cycle
- Thanks to their unbeatable convenience, online payment portals compel customers to provide payment faster
- By reducing their number of damage disputes, equipment rental companies can also improve their DSO
For most businesses to thrive, having a fast and reliable cash flow is of the utmost importance. When income is steady, covering expenses and investing resources back into the business can be done without issue. But when a company’s receipt of payment is turbulent, every aspect of keeping the lights on becomes much more difficult.
The most effective way to gauge the health of an organization’s cash flow is with the metric days sales outstanding (typically abbreviated as “DSO.”) DSO measures the average number of days a company takes to collect payment for a sale. Commonly determined on monthly, quarterly, and annual bases, DSO is calculated with the mathematical formula below:
Days Sales Outstanding (DSO) = Average Accounts Receivable (A/R) / Revenue X (Number of Days)
The higher a company’s DSO, the longer it usually takes for them to receive payment, a primary cause of cash flow troubles. Conversely, a low DSO (which all companies should strive for) generally correlates with a healthy cash flow.
So, what can equipment rental companies do to shorten their DSO? In this blog post, we’ll be covering how such businesses can improve their cash flow from two different angles.
The unmatched convenience of Customer Portal
These days, just about everyone prefers to pay bills online, as opposed to more traditional methods like sending a check through the mail. Filling out an online form is considerably faster and easier than any “analog” payment method and doesn’t run the risk of getting lost by a postal service. For these reasons, it should come as no surprise that when customers have the option to pay invoices online, they tend to send payments faster.
Equipment rental companies can take advantage of this phenomenon by providing their customers with an easy means of paying invoices online. Wynne Systems’ Customer Portal solution delivers just that. Through its easy-to-use interface, customers can submit payment via credit card with just a few clicks. As a result, invoices that would otherwise go ignored for weeks on end (if not longer) are paid in considerably less time. This accelerated receipt of payment improves cash flow, allowing businesses to continue their operations without interruption.
The higher a company’s DSO, the longer it usually takes for them to receive payment, a primary cause of cash flow troubles. Conversely, a low DSO (which all companies should strive for) generally correlates with a healthy cash flow.
Resolving disputes before they happen with MobileLink
While most late payments are delayed due to some combination of being ignored, forgotten about, or financial distress on the customer’s part, a significant number can be attributed to disputed responsibility. In the equipment rental industry, damage invoices are the primary example of this phenomenon. When evidence to the contrary can’t be provided, customers often claim that damage to returned equipment was already present during pickup. Such disagreements jeopardize customer-client relationships and cause payments to go unfulfilled for months on end.
Fortunately, Wynne Systems’ MobileLink solution greatly alleviates this common challenge. MobileLink enables yard personnel to capture photos of equipment quickly and easily during checkout and check-in via their mobile device. By having these photos on hand, damage disputes can be resolved without acrimony. And by extension, invoices that would have been paid late (due to disagreements regarding culpability) are instead paid on time. This contributes towards improved DSO and cash flow.
Interested in what Wynne Systems’ solutions can do to improve your equipment rental business’ DSO? Click here to contact us today.
