There is no silver bullet for running your Architecture and Engineering business. But what if you could monitor and improve just one Key Performance Indicator (KPI) and improve your cash flow by as much as a $1,000,000 per month? Would that be worth measuring and managing for you?
Improving your Day Sales Outstanding (DSO) is critical to improving cash flow, and DSO is described in multiple ways with multiple formulas – but let’s simplify to the core as DSO is the measurement from the time the work is completed until the time payment for the work is collected. To really dig into DSO, it is made up of two main time components that deserve to be measured:
The latter item, AR Aging, is an area that all of us are used to working on. The need for process and accountability in AR Management and Collections is imperative – and developing a reliable process to improve collections is important and the subject of an upcoming blog as well. But today, let’s look at how we can address the Time to Invoice (TTI). Four primary issues crop up to add days to the TTI measurement:
Measuring TTI is as simple as using your Vision or Vantagepoint reporting system to identify the exact date of work completion and the date of invoice. Improving this number trending over time can have huge paybacks. To make sure you are reducing your days and improving your cash flow, you may want to:
What have we seen happen? By applying these strategies, many organizations have improved their TTI in the past year by 5-8 days by utilizing improved process and automated SIMPLE improvements. By using EleVia Electronic Invoicing, one of our clients shared that with their saving of seven days, they reduced their total TTI (and therefore DSO) by 9.1%. That amounted to well over $1.5M dollars in improved cash flow.
Time to Invoice as a KPI may be able to help you improve cash flow quickly, measuring it and managing it will help you make that happen.