Indian IT companies are tightening their payment cycles, with days sales outstanding (DSO) improving from around 73-75 days to around 67-68 days in the last six quarters, according to industry estimates.
Analysts say faster cash-raising cycles could potentially enable faster reinvestment in areas like AI, bonus payouts and dividend payments.
The DSO metric measures how long it takes for a company to receive payment from its customers after issuing an invoice. According to data from UnearthInsight, over the last six quarters, DSO has improved by about a week between Q1FY25 and Q2FY26, meaning companies are focusing on improving their cash flow efficiency.
“Overall, the DSO trend is improving. Indian IT CFOs have been careful to work with the discounting teams and their customers to ensure faster payment cycles. It is a measure of cash efficiency whose improvement means more money in the bank to invest in AI initiatives. Some also keep this money in the form of investments so that, among other things, they get interest to use for dividend payments. Improving DSO by even 5-10 days means better interest payments on your investments,” explains Gaurav Vasu, Founder and CEO of UnearthInsight.
Even historically, when AI was not a strategic priority, improving DSO remained a key focus area for CFOs as it enabled companies to maintain stronger cash reserves for dividend payments, variable compensation, talent investments and capacity building, including in emerging technologies such as AI.
Experts say faster cash generation increases a company’s ability to pursue acquisitions and strengthen capabilities. While the improvement may seem marginal, often lasting only a few days, given the large transaction volumes it can translate into substantial financial gains in terms of dollars and interest.
Piyush Goel, CEO and Founder, Beyond Key, echoed this sentiment, stating that India’s top IT companies have shown visible improvement in their DSO over the past few quarters, driven by greater financial discipline and stronger working capital cycles.
For example, Persistent Systems’ Q2 FY26 data shows that billed DSO decreased from 56 days to 54 days, a sign of increased payment efficiency. Similarly, other companies have also shortened their credit cycles in response to fluctuating customer spending.
He added: “Strong customer profiles, especially in manufacturing and BFSI, have ensured faster transfers and reduced collections risk, while AI-driven treasury solutions have improved the automation of billing and cash collection processes, reducing manual dependency. The outbreak and its aftermath have caused some payment delays for Indian IT companies, but since FY24, their customers’ cash flow has improved, leading to stabilization of industry progress.”
Improved performance
Stronger liquidity, higher operating margins and free cash flow are the result of improved DSO performance, which also allows companies to invest in advanced technology such as GenAI.
In a weak economic environment, analysts say this steady operating performance is crucial to maintaining profitability. The improving DSO trend also reflects the growing maturity of the Indian IT sector, where cash efficiency and financial discipline are now closely aligned with revenue stability.
Published on October 22, 2025
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