Pillar
Cash flow management: improve liquidity without extra sales
Cash flow management is about controlling the timing of money in and money out, so your business can always meet its obligations. For most companies, the biggest and fastest available cash gain doesn't come from more sales or cheaper purchasing, but from shortening the time between invoice and payment — Days Sales Outstanding (DSO). Every day you cut from DSO is released straight back as working capital.
At a glance
- DSO formula
- (receivables / revenue) x number of days
- Effect of 10 days DSO
- roughly 2.7% of annual revenue as cash
- Fastest lever
- Consistent follow-up from day 1
Calculate your cash gain
Take your annual revenue, divide by 365 and multiply by the number of DSO days you want to cut. On EUR 2 million revenue, ten fewer DSO days frees up roughly EUR 55,000 in permanent working capital — money you don't need to borrow.
| Annual revenue | 10 fewer DSO days | 20 fewer DSO days |
|---|---|---|
| EUR 500,000 | ≈ EUR 13,700 | ≈ EUR 27,400 |
| EUR 2,000,000 | ≈ EUR 54,800 | ≈ EUR 109,600 |
| EUR 10,000,000 | ≈ EUR 274,000 | ≈ EUR 548,000 |
The cash conversion cycle: three levers
Your liquidity is determined by how long stock sits around, how fast customers pay, and how long you're allowed to pay your own suppliers. Only the second lever can be moved immediately, without negotiation or investment.
- Days Inventory Outstanding (DIO): needs purchasing and planning changes, takes months.
- Days Sales Outstanding (DSO): needs better follow-up, effect within weeks.
- Days Payable Outstanding (DPO): stretching this damages supplier relationships and your own reliability.
Forecasting instead of being caught out
A cash flow forecast is only useful if the expected payment date per invoice is realistic — not the contractual due date, but the date this specific customer historically actually pays.
Credimigo tracks payment behaviour per debtor, so your forecast is based on behaviour rather than hope.
Frequently asked questions
How do I calculate DSO?
Divide the outstanding receivables balance by revenue over the period and multiply by the number of days in that period.
What counts as a good DSO?
It depends on your sector, but a DSO more than fifteen days above your average payment term almost always points to loose follow-up.
How do I improve cash flow in the short term?
Follow up on every invoice past its due date, send a correct final reminder promptly, and offer a payment plan where needed instead of doing nothing.
Is invoice factoring an alternative?
Factoring buys time but costs a percentage of every invoice. Better follow-up is a one-off effort with a structural effect and is typically far cheaper.
Analyse your first invoice for free
Upload an outstanding invoice (PDF, PNG or JPG). Credimigo reads it, gives you a Recovery Score and prepares a correct final reminder in your customer's language, ready to send. Your first reminder is free.
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