Modernising Days Sales Outstanding (DSO) for 2025

In the evolving financial landscape of Asia, managing Days Sales Outstanding (DSO) has become a critical focus for finance leaders aiming to optimise cash flow and sustain business growth.

As companies face diverse payment behaviours, regulatory changes, and technological advancements, understanding the key issues, trends, risks, and opportunities around DSO is essential for maintaining financial health in 2025.

The strategic importance of DSO in cash flow management

Vincent Tang, vice president of Asia at Epicor Software, emphasises the fundamental role of DSO in cash flow management, referring to DSO as a key metric in cash flow management, as it measures how quickly a company collects payments after a sale.

"A lower DSO indicates efficient collections and healthier working capital, allowing businesses to reinvest in growth, manage expenses, and preserve financial stability," he opines.

He highlights automation as a vital enabler, elaborating that automating accounts receivable processes helps businesses reduce manual tasks, minimise errors, and accelerate payment cycles.

"Tools like automated invoicing, reminders, and up-to-date tracking help businesses stay proactive in collections while providing customers with a seamless payment experience," he continues.

Effectively managing DSO is not just about steady income but also about securing long-term monetary health, a priority as Asia's markets grow more complex and competitive.

Regional payment practices and invoice processing challenges

Asia's diversity in payment culture and regulatory frameworks presents unique challenges. Tang notes the critical need for optimised invoice processing:

"Timely invoice processing is essential for sustaining healthy cash flow, especially in regions with diverse payment practices. Finance teams can optimise this process using Electronic Data Interchange (EDI) for invoices, which automates data exchange and promotes efficiency while reducing manual errors." Vincent Tang

He cites Malaysia's mandatory e-invoicing introduced in 2024 as an example of regulatory shifts driving automation. "Companies can comply with such regulations via EDI to standardise formats and ensure accurate, real-time data exchange among authorities," comments Tang.

This automation improves accuracy and enhances visibility into payment statuses, enabling proactive delay management and fostering stronger supplier relationships.

Credit risk assessment and adaptive sales terms

In managing DSO, assessing credit risk accurately is paramount. Tang explains that credit risk assessments that finance teams employ should be capable of evaluating customer creditworthiness. "This involves analysing factors such as payment history, debt levels, and industry trends," he posits.

He advocates for dynamic adjustment of payment terms based on these insights: "When they have visibility of these insights, Businesses might implement shorter payment periods for higher-risk customers or offer extended terms to reliable clients with strong credit histories."

Such tailored approaches balance risk management with customer retention, aligning fiscal needs with market realities.

Leveraging technology to streamline collections

Technology adoption is a central theme in modernising DSO. Tang says finance teams can significantly improve collections and curtail payment delays through technology such as EDI, automated payment processing systems, machine learning (ML) for credit risk assessment, and AI-driven chatbots for customer interactions.

He stresses the impact of EDI:

"EDI has been particularly impactful, enabling the automated exchange of invoices and payment information between systems. This limits human error and ensures better tracking of payment statuses." Vincent Tang

Cloud-based financial management platforms and predictive analytics give finance teams real-time insights into payment patterns and risks, enabling strategic decision-making and operational efficiency. Overcoming legacy system constraints by adopting modular, scalable solutions is critical to unlocking these benefits.

Building customer relationships to encourage prompt payment

Tang underscores the importance of customer engagement in reducing DSO:

"Fostering stronger customer relationships to encourage prompt payment requires balancing personalised service and clear communication. One best practice is to leverage a comprehensive CRM system to gain a 360-degree view of customer interactions." Vincent Tang

Personalised follow-ups and transparent payment terms build trust and accountability, while flexible payment options maintain competitiveness. Such strategies nurture long-term loyalty and timely payments without compromising pricing.

Key trends shaping DSO practices in 2025

Looking ahead, Tang identifies technology as the dominant influence on DSO:

"In 2025, several factors will significantly shape DSO practices, placing technology at the forefront. AI and ML will transform collections by enabling predictive analytics, allowing businesses to anticipate payment behaviours and optimise strategies to lower DSO."

He references IDC's projection that AI spending in the Asia Pacific will grow 1.7 times faster than other digital investments, underscoring the region's rapid digital adoption. Cloud-based ERP systems complement this trend by enhancing data management and responsiveness, improving invoicing accuracy and collection speed.

However, Tang acknowledges challenges:

"Many companies are eager to harness the potential of AI and cloud solutions but face hurdles due to legacy systems. To overcome this, organisations need modular, scalable solutions to streamline financial processes and boost efficiency and cash flow." Vincent Tang

Adopting these technologies will strengthen operational resilience and improve DSO performance across Asia.

Broader economic and geopolitical context impacting DSO

The macroeconomic and geopolitical environment in Asia-Pacific also influences DSO dynamics. According to the ASEAN+3 Regional Economic Outlook 2025, the region faces heightened uncertainties from slowing growth in China, inflation normalisation, and financial conditions easing, which impact corporate liquidity and credit risk. Meanwhile, escalating US-China tensions and the ongoing tariff war complicate cross-border trade and payment behaviours.

Late payments are a persistent issue in Asia, with statistics showing that 60% of B2B invoiced sales are overdue in parts of the region, higher than in the US and UK. This strains cash flow and increases the importance of efficient DSO management.

Opportunities in Asia's Digital Financial Revolution

Asia's digital transformation presents significant opportunities to modernise DSO practices. The region is the fastest-growing market for accounts receivable automation, with projected annual growth of 15% over the next five years. Financial hubs like Singapore and Hong Kong are leading innovations in regulatory frameworks and technology adoption.

Regulatory initiatives such as Singapore's Project Guardian and Hong Kong's Wealth Management Connect 2.0 aim to create seamless, interoperable systems for financial transactions, facilitating faster settlements and improved liquidity. The shift to T+1 settlement cycles further incentivises firms to invest in robust, scalable technology infrastructure to reduce payment delays and operational risk.

Positioning finance leaders for success in 2025

In 2025, managing DSO in Asia requires a sophisticated blend of technology adoption, risk assessment, regulatory compliance, and customer engagement. Tang believes that automation, AI, and cloud-based solutions are not optional but essential tools for finance teams aiming to optimise cash flow and reduce payment delays.

Finance leaders must also navigate a complex geopolitical and economic landscape, adapting credit terms and collection strategies to evolving risks. By embracing digital transformation and fostering strong customer relationships, companies can turn DSO challenges into opportunities for competitive advantage and sustainable growth.