Part II - The Low-Hanging Fruit:
When digging into what data was available specific to the AEC industry, particularly for identifying discrete areas for quick generation of the funds necessary for a DEI program (that elusive $25,000), the simplest of the low-hanging fruit was in accounts receivable (AR), or more specifically, the average AR being carried by architecture and engineering firms and its age. We found, to our surprise, that the average firm was carrying over 20% of their AR over 30 days. We were shocked. A simple adjustment to net 30 payment terms or collections within 60 days across the board would increase the average firm’s cash on hand by 25%! For many firms, that level of predictable liquidity and reduction in debt burden would make discovering $25,000 for a new DEI program simple. To frame this another way, imagine if employers withheld 25% of worker pay on a regular basis – imagine the chaos that would create in the average household, in your household, yet we let it happen to our firms on a regular basis. Another interesting way to frame it is not paying 25% of your monthly bills and imagining what happens. I doubt any of us has had collectors be so understanding with us as we seem willing to be with clients. Hypotheticals aside, collecting payments in a timely manner is essential for the financial health and success of any company, including AEC firms (actually more so). When payments are not received within the agreed-upon timeframe, such as after 30 days (a preferable and almost ubiquitous standard in most industries), it can have detrimental effects on the company’s cash flow, profitability, overall financial stability, and EBITDA ratio. Collecting the Payments That Are Already Yours
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