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2 min readBy Sega Diarrah

DSO and Working Capital: understanding the cash you actually have

Cutting DSO from 60 to 15 days on part of the portfolio releases more cash than most working-capital optimisation plans. Here's how.

Why DSO is the most under-rated KPI

DSO (Days Sales Outstanding) measures the average number of days between issuing an invoice and getting paid. For a French B2B SMB the median DSO sits around 57 days (source: DGCCRF + Médiateur des entreprises). In OHADA Africa it routinely exceeds 90.

In hard numbers: if you bill €1M per month, each day of DSO ties up roughly €33,000 of cash. Cutting DSO from 60 to 30 days on half the portfolio therefore releases €500,000 of permanent cash.

DSO and working capital: the full mechanics

WCR (Working Capital Requirement) is the gap between:

  • your trade receivables + inventory
  • your trade payables

Cutting DSO directly cuts WCR. And lower WCR means less equity or short-term debt to mobilise. Mechanically, your return on equity goes up.

Three levers, three timeframes

1. Renegotiate payment terms (long term)

Move from net-60 to net-30. Real impact but slow — typically 12 to 18 months to propagate across an existing book. Reserved for healthy commercial relationships.

2. Active collections (mid term)

Automated dunning, customer credit scoring, order holds beyond N days overdue. Impact: -10 to -15 % DSO over 6 months. That's what the Dunning module of Tauraco ERP does.

3. Selective factoring (immediate)

Factor the invoices you want, when you want. Impact from the first invoice factored: DSO on the factored sub-book is divided by 5. No customer approval needed (confidential factoring available).

How Tauraco measures it

The ERP dashboard shows:

  • Global DSO, per customer, per segment
  • Receivables aging (0-30, 31-60, 61-90, >90 days)
  • Cash trapped in working capital
  • Simulation: "if I factor X invoices grade ≥ B, how much cash gets released?"

The Forecast module projects these indicators over 90 days, factoring in scheduled invoices and seasonality.

The critical threshold most overlook

Beyond a DSO of 75 days, the hidden cost of working capital exceeds factoring fees in almost all cases. Many firms keep DSO high by habit when the economic case clearly favours partial factoring.

Going deeper