Days Sales Outstanding (DSO) remains one of the most critical financial metrics for construction materials suppliers. The building products sample in McGrathNicol's 2024 report averaged 53.7 days, while broader construction benchmarks can extend to 60-90+ days. For suppliers managing extended payment cycles, solutions like net terms financing can improve cash flow by advancing funds on approved invoices while buyers retain their agreed payment terms. Understanding where your DSO stands against 2026 benchmarks is essential for identifying improvement opportunities and maintaining competitive advantage in a market where 70% of contractors regularly face delayed payments.
Days Sales Outstanding measures the average number of days it takes a company to collect payment after a sale. For construction materials suppliers, this metric carries particular weight because of the industry's unique payment dynamics and extended credit terms.
DSO provides a clear window into several critical business functions:
Construction materials suppliers often operate in a working-capital-intensive environment where cash tied up in receivables can create compounding operational problems:
The situation intensifies when you consider that 75% of subcontractors front material costs themselves due to payment delays, creating pressure throughout the supply chain.
Several factors influence DSO in construction materials distribution:
Calculating DSO requires a straightforward formula, but applying it correctly ensures you get actionable insights.
The standard DSO formula is:
DSO = (Accounts Receivable ÷ Total Credit Sales) × Number of Days in Period
For example, if a construction materials supplier has:
DSO = ($2,500,000 ÷ $7,500,000) × 91 = 30.3 days
Context matters when evaluating your DSO:
The general contractor DSO range of 47 to 83 days illustrates the wide variance in performance even within similar business types.
Avoid these calculation errors that skew your analysis:
Understanding where your DSO stands relative to industry standards helps identify whether you face a systemic challenge or simply need targeted improvements.
Construction materials encompasses multiple segments with varying DSO performance:
Building Materials:
Construction & Engineering:
General Construction:
The building materials sector improved from 56.9 days in 2023 to 53.7 days in 2024, showing that systematic efforts can move the needle.
Geography plays a significant role in payment behavior:
Suppliers operating internationally must account for these variations in their cash flow planning and credit risk management.
Multiple dynamics push DSO higher or lower:
The payment terms you offer directly correlate with your DSO. Understanding this relationship helps you balance competitive positioning with cash flow needs.
Standard payment terms strongly influence expected DSO, but they do not create a mathematical minimum because buyers can pay before or after an invoice's due date:
Actual DSO may be lower or higher depending on early payments, late payments, invoice timing, disputes, and the mix of outstanding receivables.
In Asia, average payment terms reached 76 days with actual delays averaging 65 additional days, pushing total collection time past 140 days.
Your credit approval process sets the foundation for DSO performance:
Modern business credit check solutions enable real-time decisioning that balances these competing priorities without manual bottlenecks.
Consider these approaches to optimize terms while maintaining relationships:
Suppliers using net terms management can offer flexible buyer terms while receiving an advance on approved invoices, separating seller cash-flow timing from the buyer's payment schedule.
Improving DSO requires systematic attention to the entire order-to-cash cycle, not just collections.
Invoice quality directly impacts payment timing:
Companies using automated AR platforms report significant reductions in invoice-related delays.
Waiting until invoices are overdue guarantees extended DSO. Instead:
Research shows 65% collection success when first contact occurs within 24 hours of an invoice going past due, compared to just 15% after 14 days.
Strong credit management prevents DSO problems before they start:
Technology transforms DSO management from reactive firefighting to proactive optimization.
Traditional credit checks take days and rely on limited data. Modern AI-powered systems:
This speed matters because 64% of subcontractors experience slow payments from general contractors, creating downstream pressure on materials suppliers to make faster credit decisions.
Automated systems collect 12-18 days faster than manual processes. Key capabilities include:
Agentic collections platforms combine AI-driven automation with human oversight to maintain customer relationships while accelerating payment.
Fragmented systems create data silos and manual work. Integrated platforms provide:
Companies adopting integrated B2B payment platforms report operational efficiency gains alongside DSO improvements.
Effective credit risk management prevents DSO problems by filtering out high-risk buyers before they become overdue accounts.
Beyond traditional credit reports, modern assessment considers:
With more than 80% of suppliers in Asia reporting late B2B payments, thorough credit assessment becomes even more critical for international operations.
Non-recourse financing fundamentally changes the DSO equation:
Unlike traditional factoring where sellers retain recourse liability, non-recourse solutions from platforms like Resolve Pay mean you're protected if approved customers don't pay.
Growth-focused businesses often extend credit too liberally. Find balance by:
Real-world examples demonstrate achievable improvements.
Construction materials suppliers who implement comprehensive AR automation report significant results. Industry data shows companies achieving:
Suppliers transitioning from manual to automated collections see measurable improvements:
The 73% of building products companies that recorded revenue increases in FY24 often paired growth with improved AR processes to avoid cash flow constraints.
ConEquip, a construction equipment distributor using comprehensive B2B payment solutions, achieved 30% year-over-year growth while maintaining healthy cash flow through net terms financing. Similarly, Trenchless Supply reduced AR workload by 90% while achieving credit approvals in under 24 hours.
The industry continues evolving toward digital-first payment experiences.
Buy Now, Pay Later models are gaining traction in B2B contexts:
As a spinout from Affirm, Resolve Pay brings consumer BNPL expertise to B2B, helping construction material suppliers compete with the flexibility buyers increasingly expect.
Advanced analytics continue reshaping AR management:
These capabilities align with the 82% of contractors willing to embrace digital payment systems.
Payment functionality increasingly integrates directly into business workflows:
Suppliers can use Resolve Pay ecommerce integrations to embed net terms into ecommerce workflows and connect credit, payment, and accounting processes.
For construction materials suppliers serious about DSO improvement, the path forward combines process optimization with technology adoption:
With $280 billion in annual industry waste tied to slow payments, suppliers who master DSO management gain significant competitive advantage. Solutions like Resolve Pay enable construction materials suppliers to offer competitive payment terms while maintaining healthy cash flow through non-recourse financing.
Improving DSO requires more than faster collections. Construction materials suppliers also need stronger credit decisions, efficient invoicing, automated follow-up, and payment terms that support buyers without restricting seller cash flow.
Resolve Pay brings these functions together through:
By separating buyer payment timing from supplier cash flow, Resolve Pay helps suppliers improve receivables efficiency, reduce manual AR work, offer competitive terms, and maintain greater working-capital predictability as they grow.
A good DSO for a construction materials supplier depends on its payment terms, customer mix, and operating model. McGrathNicol's building products sample averaged 53.7 days, while broader construction benchmarks can reach 60-90+ days. Best-in-class performers achieve around 29 days. Compare your performance to similar businesses in your segment rather than broad industry averages for meaningful benchmarking.
Offering extended payment terms directly influences your DSO. If you offer Net 60 terms, customers may pay around that timeframe, though actual DSO varies based on early payments, late payments, and your receivables mix. To offer extended terms without cash flow strain, consider non-recourse financing solutions that advance funds on approved invoices while your customers maintain their agreed payment schedule.
Yes, when structured as non-recourse financing on approved invoices. Resolve Pay can assume payment risk on approved advances and support collections while buyers retain their agreed terms. This accelerates seller cash flow without the traditional risk profile. The key is robust credit underwriting that approves appropriate buyers, allowing you to offer competitive terms without absorbing default risk.
High DSO in construction materials typically stems from invoicing problems that create disputes, credit policies that approve slow-paying buyers, collection processes lacking systematic follow-up, and payment terms that don't match customer segments. Additionally, 64% of subcontractors experience slow payments from general contractors, creating a cascade effect that impacts material suppliers throughout the supply chain.
Calculate DSO monthly at minimum, with weekly monitoring for high-volume operations. Monthly calculations reveal trends and seasonal patterns, while weekly reviews catch developing problems early. Review DSO by customer segment (contractor size, region, product line) to identify specific areas needing attention. Benchmark quarterly against industry data to understand your competitive position and track improvement progress.
This post is to be used for informational purposes only and does not constitute formal legal, business, or tax advice. Each person should consult his or her own attorney, business advisor, or tax advisor with respect to matters referenced in this post. Resolve assumes no liability for actions taken in reliance upon the information contained herein.