Where do the gains of Credit Management software come from?
Credit Management software, also called collections and customer risk management software, acts on four measurable levers:
- Cash: by reducing DSO (days sales outstanding), it brings back cash tied up with your customers;
- Financing costs: this released cash reduces your short-term financing needs (overdraft, factoring, credit lines);
- Bad debt: risk assessment, monitoring and early reminders reduce uncollectable receivables;
- Productivity: automated reminders and prioritisation free up time for analysis and high-stakes cases.
How is the cash released calculated?
Each day of DSO represents one day of sales tied up with your customers:
Cash released = (Annual revenue excl. VAT ÷ 365) × Days of DSO saved
For €100M of revenue excl. VAT, one day of DSO represents about €274,000. Reducing DSO by 10 days therefore releases €2.7M of cash. Financed at 4%, this amount represents about €110,000 of financing costs saved every year.
Calculating on revenue excluding VAT is deliberately conservative: as your receivables include VAT, the actual cash gain is generally higher.
One-off gain and recurring gain
The cash released is a one-off gain: once DSO is reduced, the cash remains available as long as DSO is maintained. Financing costs saved and bad debt avoided are recurring gains, repeated every year. The sum of both is what should be compared with the cost of Credit Management software.
How to reduce DSO in practice
- Structured dunning: scenarios tailored to each customer’s profile and risk, with pre-due reminders;
- Prioritisation: an agenda that focuses collection officers on the highest-stakes cases;
- Fast dispute resolution, together with sales and sales administration;
- Controlled risk: credit limits, behavioural scoring, well-managed credit insurance;
- Steering: DSO, aged balance and delays tracked by company, segment and salesperson.
Start by measuring your baseline with our DSO calculator, then see how Hoopiz automates these levers.
Frequently asked questions
How quickly does Credit Management software pay for itself?
It depends on your starting point, your receivables volume and the scope deployed. For a company managing a large volume of customers and invoices, the cash released by a lower DSO generally far exceeds the annual cost of the software. In a demo, we show you which levers Hoopiz acts on for your organisation.
Why −10 days of DSO?
This is the order of magnitude we observe among our mid-sized and group customers after 12 months of using Hoopiz. It depends on the starting DSO and on the organisation: you can adjust the target reduction in the simulator.
Is the cash released an annual gain?
No: it is a one-off cash gain, available as long as DSO is maintained at its new level. The recurring annual gains are the financing costs saved on this cash and the bad debt avoided.
Does the time freed up mean headcount reductions?
That is not the goal. Time saved on repetitive tasks (reminders, searches, reconciliations) is reinvested in risk analysis, complex cases and relationships with customers and sales teams.
What data is needed for an accurate estimate?
Your aged balance, monthly revenue, bad debt and team organisation are enough for a first estimate. These elements are reviewed with you during the scoping of a Hoopiz project.