The Challenge
A business line within a larger global enterprise organization was struggling with high Work In Progress (WIP) and Days Sales Outstanding (DSO) numbers. Although the company experienced healthy organic growth, achieving their overall projections required an aggressive M&A strategy, which in turn demanded an increase in cash flow. The combined WIP plus DSO was nearly 140 days, meaning it took over 4.5 months from the time work started until payment was received. The goal was to reduce this figure to under 90 days within just two months. However, this was an unrealistic timeline for such a significant transformation, especially for a division billing over $75 million annually.
The Approach
Recognizing the ambitious nature of the task, we set clear expectations with the client, agreeing that while immediate results were unlikely, substantial improvements were achievable. Our approach began with extensive discussions across operations, billing, and collections departments, each of which had a different perspective on the root causes of the high DSO and WIP figures. The leadership team understood the need for an unbiased, fact-based consultant who could navigate the complexities of the various departments, understand their unique challenges, and build trust through a collaborative approach.
The Solution
Through detailed discussions and analysis, several underlying issues were identified. One significant problem was that less than 10% of the workforce, outside of management, understood how the company calculated the KPIs they were tracking. Additionally, despite being a $100 million business with an ERP system in place, limitations of the modules purchased, pressure from headquarters to move to a centralized ERP within the next 18 months, and the immediate need for a solution created significant challenges.
To address these issues, I designed and implemented a robust invoice tracking system that allowed the company to monitor invoices from draft to payment. The system provided dashboards, reports, and a unified view of all activity for departments including accounting, operations, and accounts receivable. This centralized platform replaced multiple apps, reduced email communication, and improved data accuracy through an integrated audit process. The system was built using low-code platforms, enabling rapid deployment and significant improvements in cash flow management within a six-month period.
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Invoice Tracking System: Designed and implemented a robust system that allowed the company to monitor invoices from draft to payment, ensuring visibility and transparency across all stages.
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Cross-Departmental Access: Provided dashboards, reports, and a unified view of all activity to departments including accounting, operations, and accounts receivable, enabling better collaboration and information sharing.
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Centralized Platform: Consolidated three departments’ activities into one platform, reducing the reliance on multiple apps and decreasing the need for excessive email communication.
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Error Reduction: The new system led to a reduction of errors by over 90%, ensuring more accurate and reliable financial data.
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Audit Process: Integrated an audit process into the system to continually monitor the consistency and accuracy of the data, preventing issues from recurring.
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Low-Code Implementation: Utilized low-code platforms for rapid development and deployment, addressing major cash flow problems effectively within a six-month period.
The Outcome
The implementation of the new invoice tracking system and process improvements led to a significant reduction in DSO and WIP, bringing the total time from work initiation to payment down by over 60 days. Errors were reduced by over 90%, and the collaboration between departments was vastly improved through the centralized platform. Although the initial two-month goal was ambitious, the project was successfully completed in six months, achieving the desired outcome and setting the company up for further financial stability and growth as they pursued their M&A strategy.
Conclusion
This success story illustrates the importance of setting realistic expectations, understanding the root causes of complex issues, and delivering tailored solutions that address those causes effectively. By taking a collaborative, unbiased approach and leveraging low-code platforms, we were able to significantly improve the company’s cash flow and operational efficiency, enabling them to meet their strategic goals.
