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F R OM T H E F O U N D E R
Prosperity leads to a slowACP
A s I wrote in these pages a fewweeks ago, the prosperity of the AEC industry as a whole has led to individual firms piling on overhead staff and tolerating non-chargeability in people who are supposed to be highly chargeable. It has also resulted in a certain sloppiness as it relates to billing and collection. If you are seeing your cashflow slowing down and your average collection period rising, you may want to take a look at why that is happening.
Mark Zweig
If you, in spite of having record revenues and profitability, are seeing your cashflow slowing down and your average collection period rising, you may want to take a look at why that is happening. Here are some of the things I would want to take a look at: 1. Speed of billing. Firms that have their stuff together can get their bills out quickly, and at any time someone in the firm needs one. Firms that don’t turn this into a lengthy days-long process will collect their money faster even if it isn’t reflected in the average collection period, which starts once the bill is actually sent. Why some firms have such slow and bureaucratic processes for billing is beyond me. With all of the off-the- shelf systems one can buy today that will handle time and expense reporting, along with billing,
there are few excuses for the inability to produce an accurate invoice quickly. Understaffing of the accounting and billing function is one possibility. Another possibility is that management tolerates days to get invoices for job-related expenses or sub consultants to get keyed in, or the firm has a lengthy (and typically unnecessary) time sheet review process. Either way, it will always lead to worse cashflow than the company should have. 2. Bad invoices. The invoices themselves have to be clear and formatted correctly, must be consistent with the contract the firm is working under, and should go to the right person in the client organization who has authorization to pay. If any of these are off, collections will slow down.
See MARK ZWEIG, page 12
THE ZWEIG LETTER MAY 16, 2022, ISSUE 1441
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