How Construction Materials Distributors Can Reduce Days Sales Outstanding (DSO) with AR Automation

How Construction Materials Distributors Can Reduce Days Sales Outstanding (DSO) with AR Automation

For construction materials distributors and suppliers, Days Sales Outstanding (DSO) directly impacts cash flow, inventory planning, and the ability to take on new projects. When payments are delayed, working capital gets tied up in receivables while material costs and freight expenses continue to rise.

In many cases, high DSO isn’t caused by contractors refusing to pay. It’s the result of manual AR processes, slow credit approvals, and payment methods that don’t match how customers do business today. AR automation helps distributors address these challenges and get paid faster without disrupting customer relationships.

What Is DSO and Why It Matters in Construction Supply

Days Sales Outstanding measures the average number of days it takes to collect payment after a sale is made. For construction suppliers, DSO is especially critical because:

• Orders are often large and frequent

• Payment terms vary by contractor or project

• Margins are sensitive to delays in cash flow

Even small increases in DSO can strain working capital and limit purchasing power during peak construction seasons.

Common Causes of High DSO for Construction Distributors

Construction supply businesses face unique AR challenges, including:

• PDF credit applications that slow down contractor onboarding

• Inconsistent credit reviews for new or expanding customers

• Checks being mailed in that delay funds and require manual reconciliation

• Invoice disputes tied to job numbers, delivery dates, or partial shipments

These issues add friction throughout the AR lifecycle and extend the time it takes to collect payment.

How AR Automation Helps Reduce DSO

• Faster Credit Approvals for Contractors

Digital credit applications allow contractors to apply online and submit required documentation upfront. Standardized workflows help credit teams review applications faster and more consistently, allowing distributors to approve credit and onboard customers faster starting the payment clock earlier.

• Online Payment Portals Built for B2B

Online payment portals give contractors a simple way to view invoices, track balances, and pay electronically. Instead of mailing checks or calling AR for account details, customers can pay when it’s convenient, speeding up collections and reducing DSO.

• Automated Invoicing and Reminders

AR automation ensures invoices are delivered promptly and reminders are sent before due dates. Proactive communication reduces late payments and minimizes the need for manual follow-ups, which are especially time-consuming in high-volume environments.

• Improved Visibility Reduces Disputes

Centralized access to invoices, delivery details, and payment history helps contractors quickly resolve questions. Fewer disputes mean fewer payment delays and faster cash collection.

Why Credit and Payments Work Better Together

The biggest DSO improvements come when credit applications and payments are connected. Faster credit approvals, clear terms, and easy payment options create a smoother experience for contractors and reduce delays across the entire order-to-cash process.

Final Thoughts

For construction materials distributors and suppliers, high DSO is often a process issue not a customer issue. AR automation helps reduce Days Sales Outstanding by speeding up credit approvals, simplifying payments, improving visibility, and reducing manual work.

By modernizing AR with digital credit applications and online payment portals, distributors can improve cash flow, support growth, and keep projects moving without adding strain to their finance teams. To learn more, schedule a free consultation with Dill here.