ImPROVING COLLECTIONS PROCESSES
Situation
A global, B2B engineering services company saw opportunities to improve the processes and policies tied to accounts receivable aging. Financial data indicated that overall our client had effectively collected receivables over time, but that there was an opportunity for compression in lowering aged receivables over 60 days. Such a reduction would lead to increased working capital and potentially lower collections resource requirements.
Solution
Market Strategy Group worked closely with key stakeholders to conduct a root cause analysis to identify and document true drivers of aging performance. We analyzed the entire prospect-to-cash process because our experience has shown that many of the drivers of improved days sales outstanding and aging performance are upstream from the collection process. With the root cause analysis as a foundation, we engaged in process redesign, including new policies and resource allocation, and developed the implementation strategy to improve DSO and aging performance.
Outcome
Market Strategy Group created a process and implementation strategy for our client to improve DSO and aging performance. We identified opportunities to improve receivables, lower DSO by 5 days, and free up $14M in working capital. Out recommendations were approved by the company's board and are currently in the process of implementation.