What can a company do to improve cash flow based on DSO reports?

Shortening payment terms is an effective strategy for improving cash flow based on Days Sales Outstanding (DSO) reports. DSO measures how long it takes a company to collect payment after a sale is made, and a high DSO can indicate that a company is taking longer to convert sales into cash, which can create cash flow challenges.

By shortening payment terms, a company encourages quicker payments from its customers, meaning that cash inflows can occur sooner. This approach can be particularly effective if customers are accustomed to settling their accounts quickly; it incentivizes timely payment and reduces the wait for cash, thereby improving liquidity. Additionally, quicker collection can enhance a company's ability to invest in new opportunities or cover operational expenses without relying on external financing.

The other options do not directly address the timing of cash inflows. Lengthening payment terms may delay cash receipts, reducing liquidity. Reducing the number of products offered and increasing prices could have varied effects on sales and customer relationships, but they do not specifically target improvements in cash collection timing.