A/E Design Firms Increase Cash Flow - Reduce Collection Delays

Online, October 1, 2010 (Newswire.com) - Natick, MA-Leaders of architecture, engineering, and environmental consulting design firms are implementing strategies to speed up collections during difficult economic times.

In an article published in the Sept. 27 issue of The Zweig Letter, executives said they have been able to reduce average collection periods on accounts receivable, resulting in increased cash flow. That trend matches the findings of ZweigWhite's 2010 Financial Performance Survey.

According to the survey, average collection periods have dropped from 78 days in the 2009 edition of the survey to 74 days in the current edition. That's down from a 10-year high of 82 days in 2008.

"By shortening our billing cycle by 15 days, we were able to increase our cash flow by 50% in 2009," Linda Leong, chief financial officer with Finley Engineering Company, Inc. in Lamar, Missouri, told The Zweig Letter. "The key to success is to focus on the entire business process: credit approval, billing processes, and collection efforts and by doing so you will maximize cash flow and minimize back-end collection efforts."

Leong added that firms can substantially improve cash flow shortening the gap between the close of the accounting cycle and the day invoices are mailed.

Others are taking more practical approaches to collection, including Lisa Blanton, CFO at Watry Design, Inc. in Redwood City, California.

"We implemented sending our invoices by PDF on an attached e-mail with a confirming reply back," Blanton said. The strategy reduced collections by 10 days on average.