Imagine your business needs cash – to grow, to buy equipment, return more to your shareholders. But this is not really imagination – it happens everyday. Where does your cash come from:  An outside source? Add more debt? Provide a stock offering? Sell off inventory?

How about exploring your own processes?

Yes, more cash might be in stuck in a process you nearly take for granted. Take a look at Accounts Receivable. There is cash to be found between the moment you complete a service or shipment and the moment you have cash in the bank. Sure, we all know about reducing days sales outstanding (DSO) -- the amount of cash between invoice creation and cash in hand. Companies have been targeting this for years with mixed results. But what is not well known is that there is cash elsewhere in your accounts receivable performance chain—namely before the invoice is created.

This period between service completion and invoice creation is called “days revenue outstanding” (DRO), and exists only because of internal processing time. This is cash you have earned but can’t yet touch. Ouch. You can’t even invoice yet. Since this time is seldom tracked, it’s usually much longer than most leaders realize. This cash can be – in fact to get what popped into your mind in the first sentence of this post it needs to be - recovered.

The benefit to a business of reducing DRO can be huge. Consider a company that does $720 million a year in sales – that’s $2 million a day. If five days can be reduced in the cycle between service completion (or shipment) and invoice creation the company can realize $10 million one-time cash back into its business. $10 million without any negative impact to the customer experience.

Recently, leaders of a national transportation and logistics company believed this DRO time in their operations could be no longer than five days. Collaborating with Aveus the actual time cash was trapped in the accounts receivable chain was shown to be 12 days. The associated dollars trapped was in the millions. Company leaders felt as if they’d found cash trapped under the proverbial mattress.

In this company the time savings translated into several millions of dollars in free-cash the company is now realizing without intrusion into their customer’s processes. Using the information in the analysis the company was able to pinpoint and prioritize the most fruitful areas to attack.

To find the amount of cash hiding under your DRO mattress:
• Assess DRO process operations and the time-impact on cash
• Designate cash recovery as a priority
• Determine the cash impact of slow cash velocity and the primary sources of lost time, lost quality, and variation
• Identify opportunities for improving these issue areas
• Plan for change and plan for sustaining the gains
• Make it happen

Look within your own processes first to generate the cash you need. And don’t be surprised what you find in the couch cushions, or even under the mattress.

About the author:

Mike Verdin has 25 years of experience as a consultant, industry practitioner, change leader, and educator with success stories on three continents and in numerous cultures.