How to Reduce DSO in Healthcare Staffing: 8-Step Guide for Faster Payments

This guide shows you how to reduce Days Sales Outstanding (DSO) in healthcare staffing by implementing eight proven operational, billing, and documentation improvements. Because healthcare staffing invoices often take 45–75 days to pay, reducing DSO requires process control, faster invoicing, and better documentation workflows. With the right systems, you can improve cash flow in as little as 30–60 days, even with complex hospital billing environments.

This tutorial is designed for staffing agency owners, AR teams, and back-office leaders looking for practical, high-impact improvements.

Before You Begin: Prerequisites

To follow this guide, you’ll need:

• Access to your agency’s A/R aging report
• Contract rate sheets for each client
• Timekeeping or VMS access
• Staffing assignment records
• Invoicing and payroll workflow visibility
• Point of contact for each facility’s AP department

Optional but helpful:

• A/R automation tools
• EDI or portal billing access
• A financing partner for support with long payment cycles

Why DSO Is a Critical Metric for Healthcare Staffing

DSO measures the average number of days it takes your agency to get paid after issuing an invoice. According to SIA benchmarks (2024):

• Typical healthcare staffing DSO = 45–55 days
• Good DSO = 35–45 days
• Problematic DSO = 60+ days

High DSO leads to:

• Payroll strain
• Difficulty covering taxes and vendor costs
• Slower growth
• Cash flow gaps
• Higher borrowing costs

Most DSO problems stem from documentation delays, billing errors, portal issues, or slow client communication—all fixable with the right structure.

Step 1: Standardize Timekeeping Across All Assignments

Timekeeping inconsistency is one of the most common causes of delayed invoices in healthcare staffing.

Why This Matters

Facilities use different systems (Epic, Cerner, Kronos/UKG, ShiftWise, etc.). If time entries don’t align with approved records, invoices get disputed.

Action Steps

1. Require clinicians to submit time within 24 hours of each shift.
2. Use digital timekeeping whenever a facility allows it.
3. Assign recruiters to verify timesheet approval before invoicing.
4. Create an internal “timekeeping quick guide” for each facility.

Success Indicator

Timesheet disputes fall by 50%+, and invoices leave the door within 48 hours of payroll.

Takeaway: Consistent, validated timekeeping is the foundation for lowering DSO.

Step 2: Fix Documentation Quality Issues

Documentation errors are the number one cause of payment delays in healthcare staffing.

HFMA reports (2024) that missing or incorrect documentation causes 20–40% of delays.

Key Documents to Standardize

• Timesheets
• Facility-required billing documents
• Unit charge approvals
• Rate confirmation forms
• Overtime approvals
• Orientation hours
• Credential packets (required by some hospitals)

Action Steps

1. Build documentation checklists for each facility.
2. Train recruiters to collect required docs before the invoice period closes.
3. Store everything in a centralized digital folder accessible to AR.
4. Audit documentation weekly.

Success Indicator

Fewer “missing attachment” rejections from facility AP or VMS portals.

Takeaway: Clean documentation eliminates avoidable billing cycle interruptions.

Step 3: Implement Rapid Invoice Delivery (24-48 Hours)

Speed is a major factor in DSO reduction. Every delay in invoicing slows the facility’s AP workflow.

Why Timing Matters

Hospitals run AP batches weekly or biweekly. If your invoice misses the cycle, payment may be delayed by 7–14 days.

Action Steps

1. Run payroll on the same day each week.
2. Trigger invoice generation immediately after payroll completion.
3. Submit invoices within 24–48 hours.
4. Automate invoice creation through ATS/VMS integrations where possible.

Success Indicator

Invoices consistently sent within two days of shift completion or payroll.

Takeaway: Faster invoicing = faster payment and lower DSO.

Step 4: Strengthen A/R Follow-Up Cadence

Consistent follow-up is essential. Many facilities only respond after multiple touches.

Recommended Follow-Up Timeline

• Day 15: Light check-in (“confirm receipt”)
• Day 30: Payment status update
• Day 35: Phone call + resend attachments
• Day 45: Escalate to AP supervisor
• Day 60+: Executive escalation or contract review

Why This Works

Consistency prevents invoices from stalling and flags issues early.

Avoid These Mistakes

• Waiting until 60+ days to follow up
• Not tracking follow-up attempts
• Not documenting disputes or conversations

Success Indicator

Reduction in 60-day aging and fewer AP requests for resubmissions.

Takeaway: Structure—not persistence—is the key to effective follow-up.

Step 5: Use EDI or Portal Billing to Reduce Errors

Portal billing has become standard for hospitals and larger health systems.

Common Portals

• ShiftWise
• Medefis
• RightSourcing
• VMS/ATS integrations
• Epic or Cerner billing modules
• Medicaid or Medicare EDI

Portal Billing Best Practices

1. Create internal SOPs for each portal.
2. Document exact steps with screenshots.
3. Train multiple team members per portal.
4. Track portal errors and correct root causes.

Why This Reduces DSO

Portal errors often prevent invoice submission—not just payment.

Success Indicator

Fewer rejected or “incomplete” submissions and faster AP acceptance.

Takeaway: Portal mastery eliminates a major source of delay for healthcare staffing invoices.

Step 6: Identify High-Risk Clients Early (Credit + Behavior)

Not all facilities pay the same. Some are chronically slow.

High-Risk Indicators

• Payment history over 60 days
• Complaints from other vendors
• Budget freeze announcements
• Mergers or financial distress
• Excessive invoice disputes
• Lack of AP responsiveness

Action Steps

1. Check credit for all new clients.
2. Analyze payment history monthly.
3. Flag and prioritize slow payers in your CRM.
4. Require better documentation for high-risk accounts.

Success Indicator

Reduction in 90-day aging and fewer write-offs.

Takeaway: Early risk identification protects cash flow and helps you allocate AR resources effectively.

Step 7: Audit A/R Aging Reports Weekly

Weekly aging audits help AR teams spot issues before they turn into 90-day problems.

Audit Checklist

• Invoices at 0–30 days → usually documentation
• Invoices at 31–45 days → follow-up needed
• Invoices at 46–60 days → escalating issue
• Invoices 60+ days → critical, intervention required

Best Practices

• Review by facility
• Review by recruiter
• Review by department
• Track trends (e.g., common disputes or bottlenecks)

Impact

According to SIA (2024), agencies that review aging weekly reduce DSO by 5–15 days on average.

Takeaway: Weekly aging equals early problem detection—your most reliable DSO control lever.

Step 8: Use Funding Partners to Stabilize Cash Flow (Optional but Effective)

Payroll debt is one of the biggest DSO-related risks for staffing firms. Many agencies use funding partners to eliminate cash flow bottlenecks caused by slow facility payments.

Benefits of Funding Partnerships

• Immediate cash for invoices
• Payroll support
• A/R management assistance
• Facility credit checks
• Back-office support

Why It Helps DSO

Funding provides near-instant cash on approved invoices, preventing operational slowdowns caused by long billing cycles.

Best Use Cases

• Fast-growing agencies
• Agencies with new hospital contracts
• Firms with 60+ day facility payment cycles

Takeaway: Funding turns slow-paying hospital invoices into predictable, stable cash flow.

Common DSO Pitfalls to Avoid

To maintain low DSO, avoid the following mistakes:

1. Delayed or inconsistent invoicing

This almost guarantees slow payment.

2. Missing documentation

Facilities reject or hold invoices lacking timesheets or approvals.

3. Overreliance on one AR team member

If they leave, your cash flow freezes.

4. Not knowing facility-specific requirements

Hospital billing is not one-size-fits-all.

5. Not using data to track patterns

Aging trends reveal systemic issues.

6. Allowing disputes to go unresolved

Unresolved disputes can extend DSO by 30–60 days.

Conclusion: A Proven Framework for Lowering DSO

Healthcare staffing agencies can reliably reduce DSO using this proven eight-step system:

1. Standardize timekeeping
2. Improve documentation quality
3. Deliver invoices within 24–48 hours
4. Follow structured AR follow-up
5. Master portal billing
6. Identify high-risk clients early
7. Audit aging weekly
8. Use funding partners when needed

These steps reduce avoidable errors, accelerate payment cycles, and stabilize your financial operations.
With consistent implementation, agencies often see DSO improvements of 15–30% within 60 days.