Reducing Days Sales Outstanding through Accounts Receivable Strategies

ABC Corporation is evaluating its accounts receivable management strategy. The company has noticed an increase in its Days Sales Outstanding (DSO) from 30 to 45 days over the last year. Management is concerned that the longer collection period may affect cash flow and overall business operations. They are considering several strategies to improve their accounts receivable management:

1. Offering early payment discounts to customers.

2. Tightening credit terms and reducing the credit limits for customers.

3. Outsourcing collections to a third-party agency.

Which of the following strategies is likely to be the most effective in directly reducing DSO?