Client’s Challenging Situation:
A consulting client asked us to provide interim CEO services. The client was a family business, delivering engineering services to municipalities and commercial clients. Our client wanted us to help by providing CEO “full-cycle project management”. For us, full cycle covers the full range of project activity from responding to RFPs to delivery of services to collection of money owed for services.
Scope of the Problem:
This story is about improving collection of money from clients who received value from certified professional engineers. In this situation, accounts receivable had continued to grow in “$” and “age” for years. Invoicing had not been performed on schedule and people at the engineering firm struggled to discuss “money issues” with their clients. Unresolved accounts receivables had a negative impact on cash flow, bank debt, year-end financial reporting, and people’s peace of mind.
Our Solution:
We believe collection of money from clients requires disciplined processes. Not to dig deep into detail, the full-cycle processes must include:
- Clearly understanding the client’s needs [ensuring no confusion about the client’s RFP intent],
- Creating sufficiently detailed and clear contractual agreements, in writing,
- Setting milestones for completion of deliverables,
- Monitoring the performance of deliverables, reporting the performance of deliverables,
- Approving invoices,
- Invoicing on schedule, as agreed to in the contract, and
- Creating and implementing detailed step-by-step collection processes and messages, quantifying the severity of each account receivable with respect to dollar amount and age, escalating collection steps as required, and performing collection steps consistently and on schedule.
The bullet points about above signal the need for clear and detailed steps from start of the project to closing the file on the project. There are many steps, and they must be customized and automated to fit the engineering firm’s goals.
Collection of money is a difficult activity for the majority of people. Perhaps, 75% or 80% of people avoid the task of collecting money? That is the case when you look at small to mid-size businesses’ accounts receivable.
To address the collection problem, we created a full-cycle series of steps, including the steps summarized above. We customized the process to help people in the client’s accounting department and engineering project managers communicate in ways that increased the likelihood of collecting money owed after quality work was delivered.
The Value Delivered:
It took several months to create successful time logging, milestone confirming, invoicing, and collecting processes. People at the engineering firm embraced a culture with increased “money consciousness”. The combined efforts of committed people resolved a number of large collection problems. $100,000s of dollars were collected and accounts receivables dropped to an acceptable level. Peace of mind increased.